Chapter 12 - Decision Making (Sternberg)

12.
Decision Making and Reasoning Biases

Judgment and decision making are used to select from Illusory Correlation = People are predisposed to see
among choices or to evaluate opportunities particular events or attributes and categories as going
together, even when they do not (contradiction on both
Classical Decision Theory ends but one is unrelated to the situation)
The Model of Economic Man and Woman Overconfidence = an individual’s overvaluation of
- Decisions makers are fully informed her/his own skills, knowledge, or judgement
regarding possible options Hindsight Bias = When people look at a situation
- Gaining info by option retrospectively, they believe they can easily see all the
- Ex. Choosing your brand when buying signs and events leading up to a particular outcome.
smartphone.
3 Levels of Hindsight Bias
Subjective Expected Utility Theory 1. Predictability
- The goal of human action is to seek pleasure 2. Inevitability
and avoid pain in making decisions, people 3. Memory Distortion
will seek to maximize pleasure
Fallacies
Heuristics = mental shortcuts that lighten the Gambler’s Fallacy = a mistaken belief that the
cognitive load of making decision probability of a given random event, such as winning
 Satisficing = accepts what’s good enough or losing at a game of chance, is influenced by
 Maximizing = exhaustively seeks the best previous random events.
Elimination by Aspect = making a decision in 3 Hot hand effect = a belief that a certain course of
aspects (What is cheap, what is good or what is your events will continue.
mama’s favorite)
Conjunction Fallacy = An individual gives a higher
Representative Heuristics = imaginary picture of estimate for a subset of events that for the larger set of
people (salient features) events containing the given subset
 how obviously it is similar to or representative of
the population from which it is derived Sunk Cost Fallacy = Represents the decision to
continue to invest in something simply because one
Availability Heuristics = information you use to has invested for it for a long time but it’s not even
make a decision from what you have seen recently worth it anymore.
(from what you’ve seen in the NEWS. -> frequent,
recent, extreme, vivid, negative) Opportunity costs = the prices paid for availing
oneself of certain opportunities (paying your tuition to
Anchoring Bias = people adjust their evaluations of graduate)
things by means of certain reference points
(1000USD to 250USD only sale! – notices the Naturalistic decision making = your decision is not
discount from its original price) affected by any external factors
Framing Effect = people sticks to what they hear or Group decision making = same personalities when it
seen as something more heavily impacts them (we comes in deciding to a problem
have almost cleaned the Manila Bay vs. Manila Bay
has been cleaned at 4.6% scale) Groupthink = a phenomenon characterized by
premature decision making that is generally the result
Fast and Frugal Heuristics = no time to initiate a of group members attempting to avoid conflict
decision immediately (Condition 1 > T or F? Why
False? Results to Condition 2 > T or F?)  Devil’s Advocate = contradicts the current
decision for others to be motivated against the
Single Criterion = You have an ideal type or criteria decision made.
to a certain requirement, need.
(ex. Wymberly will only marry a man who graduated
in the University of the Cordilleras)
Reasoning = the process of drawing conclusions from
principles and from evidence
Types of Reasoning
Deductive Reasoning = the process of reasoning from

one or more general statements regarding what is
known to reach a logically certain conclusion, often to
a specific application of the general statement.
 Proposition = an assertion, which may be either

true or false
 Premises = propositions about which arguments
are made
Mental model = an internal representation of

information that corresponds analogously with
whatever is being represented

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12.

Decision Making and Reasoning Biases

Deductive Reasoning = the process of reasoning from

 Proposition = an assertion, which may be either

Mental model = an internal representation of

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