DECISION
MAKING
Cognitive Psychology, Fifth Edition, Robert J. Sternberg
Chapter 12
DECISION MAKING
2 different types of models for decision
making
Prescriptive models
Models describing the best way to make a decision
Descriptive models
Models describing the way decisions are actually made
Cognitive psychologists are interested in
how people actually make decisions
Cognitive Psychology, Fifth Edition, Robert J. Sternberg
Chapter 12
CLASSICAL DECISION
THEORY
Assumed decision makers
Knew all the options available
Understood pros and cons of each option
Rationally made their final choice
Goal was to maximize value of decision
Cognitive Psychology, Fifth Edition, Robert J. Sternberg
Chapter 12
HOWARD’S DILEMMA
Thagard & Milgram (1995)
“An eminent philosopher of science once encountered a
noted decision theorist in a hallway at their university. The
decision theorist was pacing up and down, muttering, ‘What
shall I do? What shall I do?’
‘What's the matter, Howard?’ asked the philosopher.
Replied the decision theorist, ‘It's horrible, Ernest - I've got
an offer from Harvard and I don't know whether to accept it.’
‘Why Howard,’ reacted the philosopher, ‘you're one of the
world's great experts on decision making. Why don't you just
work out the decision tree, calculate the probabilities and
expected outcomes, and determine which choice maximizes
your expected utility?’
With annoyance, the other replied, ‘Come on, Ernest. This is
serious.’ ”
Cognitive Psychology, Fifth Edition, Robert J. Sternberg
Chapter 12
SUBJECTIVE UTILITY
THEORY
Goal
Seek pleasure and avoid pain
Actual judgment of pleasure and pain is made by each decision maker (subjective)
Cognitive Psychology, Fifth Edition, Robert J. Sternberg
Chapter 12
SUBJECTIVE EXPECTED
UTILITIES
Consider all possible alternatives
Use all information currently known
Weigh potential costs and benefits
Subjective weighing of various outcomes
Sound reasoning consider above factors
Cognitive Psychology, Fifth Edition, Robert J. Sternberg
Chapter 12
SATISFICING
To obtain an outcome that is good enough
Term introduced by Herbert A. Simon in his Models of Man 1957
Simon noted that humans are rational but within limits (bounded rationality)
Cognitive Psychology, Fifth Edition, Robert J. Sternberg
Chapter 12
ELIMINATION BY
ASPECTS
Tversky (1972)
Begin with a large number of options
Determine the most important attribute and then
select a cutoff value for that attribute
All alternatives with values below that cutoff
are eliminated
The process continues with the most important
remaining attribute(s) until only one alternative
remains
Cognitive Psychology, Fifth Edition, Robert J. Sternberg
Chapter 12
GROUP DECISION MAKING
Can enhance decision making
More ideas
Better memory of events
Cognitive Psychology, Fifth Edition, Robert J. Sternberg
Chapter 12
DISADVANTAGE OF
GROUP DECISIONS
Groupthink
Premature decision made by members trying to avoid conflict
Cognitive Psychology, Fifth Edition, Robert J. Sternberg
Chapter 12
SYMPTOMS OF
GROUPTHINK
Closed-mindedness
Rationalization
Squelching of dissent
Formation of “mindguard”
Feeling invulnerable
Cognitive Psychology, Fifth Edition, Robert J. Sternberg
Chapter 12
HEURISTICS INFLUENCING
DECISION MAKING
Representativeness
Availability
Anchoring & adjustment
Overconfidence
Illusory correlation
Hindsight bias
Cognitive Psychology, Fifth Edition, Robert J. Sternberg
Chapter 12
MAKING DECISIONS
Chris is 6’7”, 300 pounds, has 12 tattoos, was a champion pro
wrestler, owns nine pit bulls and has been arrested for beating a man
with a chain.
Is Chris more likely to be a man or a woman?
A motorcycle gang member or a priest?
How did you make your decision?
Cognitive Psychology, Fifth Edition, Robert J. Sternberg
Chapter 12
MAKING DECISIONS
Steve is meek and tidy, has a passion for detail, is helpful to people,
but has little real interest in people or real-world issues.
Is Steve more likely to be a librarian or a salesperson?
How did you come to your answer?
Cognitive Psychology, Fifth Edition, Robert J. Sternberg
Chapter 12
MAKING DECISIONS
Linda is a 31-year-old, single, outspoken,
and very bright person. She majored in
philosophy. As a student, she was deeply
concerned with issues of discrimination
and social justice, and also participated in
antinuclear demonstrations.
What is the probability that Linda is a bank
teller?
What is the probability that Linda is a feminist
bank teller?
Cognitive Psychology, Fifth Edition, Robert J. Sternberg
Chapter 12
REPRESENTATIVENESS
HEURISTIC
Judge probability of an event based on how it matches a stereotype
Can be accurate
Can also lead to errors
Most will overuse representativeness
i.e. Steve’s description fits our vision of a librarian, Linda seems to be more of a
feminist
Cognitive Psychology, Fifth Edition, Robert J. Sternberg
Chapter 12
REPRESENTATIVENESS
HEURISTIC
Gambler’s Fallacy
Mistaken belief that a random event is affected by previous random events
Believe that “your turn to win” has come
In reality, probability to win is still same probability
Cognitive Psychology, Fifth Edition, Robert J. Sternberg
Chapter 12
BASE RATE INFORMATION
The actual probability of an event
How many bank tellers are there in the world?
How many feminists are there?
Much research in the 1970’s &1980’s seemed to
indicate that base rate information in these type of
problems were ignored
Current research focuses on when participants do
pay attention to base rates
Cognitive Psychology, Fifth Edition, Robert J. Sternberg
Chapter 12
KOEHLER (1996)
Base rates are used when
Problems are written in ways that sensitize decision-makers to the base rate
Problems are conceptualized in relative frequency terms
Problems contain cues to base rate diagnosticity
Problems invoke heuristics that focus attention on the base rate
Cognitive Psychology, Fifth Edition, Robert J. Sternberg
Chapter 12
MAKING DECISIONS
Which are you more afraid of?
Flying in an airplane
Driving in a car
Meyers (2001)
“The Air Transport Association reports that 483
passengers were killed in plane crashes from 1995-1999
(97 per year). During these years, the National Safety
Council's Research and Statistics Department tells me,
we were 37 times safer per passenger mile in planes than
motor vehicles.”
Cognitive Psychology, Fifth Edition, Robert J. Sternberg
Chapter 12
AVAILABILITY HEURISTIC
Making judgments about the frequency or likelihood of an event
based on how easily instances come to mind
Actual frequency influences how easily evidence comes to mind but
so do other factors
Media
Vividness
Cognitive Psychology, Fifth Edition, Robert J. Sternberg
Chapter 12
SCHWARTZ (1991)
Manipulated how many instances participants
had to give of previously being assertive
One group had to recall six examples of when they
had been assertive
A second group had to think of twelve examples
Both groups were then asked to score their
assertiveness
Participants who thought of six examples scored
themselves higher than the group that had difficulty
thinking of twelve examples
Pattern of results attributed to the availability
heuristic
Cognitive Psychology, Fifth Edition, Robert J. Sternberg
Chapter 12
ANCHORING-AND-ADJUSTMENT
HEURISTIC
Begin by guessing a first approximation (an anchor)
Make adjustments to that number on the basis of additional information
Often leads to a reasonable answer
Can lead to errors in some cases
Cognitive Psychology, Fifth Edition, Robert J. Sternberg
Chapter 12
ANCHORING-AND-
ADJUSTMENT
People are influenced by an initial anchor value
Anchor value may be unreliable, irrelevant, and adjustment is often
insufficient
Cognitive Psychology, Fifth Edition, Robert J. Sternberg
Chapter 12
ANCHORING-AND-
ADJUSTMENT
Participants asked to calculate in 5 secs the answer to one of the following
problems:
1 x 2 x 3 x 4 x 5 x 6 x 7 x 8= 512
8 x 7 x 6 x 5 x 4 x 3 x 2 x 1= 2,250
The order of presentation for these two groups had a significant impact on their
estimates
The correct answer, in both cases, is 40,320!
Cognitive Psychology, Fifth Edition, Robert J. Sternberg
Chapter 12
EFFECT OF FRAMING ON
DECISIONS
Which choice would you make?
Suppose you have invested in stock equivalent to the sum
of $60,000 in a company that just filed a claim for
bankruptcy. They offer two alternatives in order to save
some of the invested money:
If Program A is adopted, $20,000 will be saved
If Program B is adopted, there is a 1/3 probability that $60,000
will be saved and a 2/3 probability that no money will be saved
Cognitive Psychology, Fifth Edition, Robert J. Sternberg
Chapter 12
RÖNNLUND, KARLSSON, LAGGNÄS,
LARSSON, & LINDSTRÖM (2005)
Examined the impact of framing on risky decisions
Manipulated age (young/older) and type of framing (positive/negative)
Participants read one of 3 scenarios
Participants selected either a risky or certain outcome
Cognitive Psychology, Fifth Edition, Robert J. Sternberg
Chapter 12
SAMPLE SCENARIO
Suppose you have invested in stock equivalent to the sum of
$60,000 in a company that just filed a claim for bankruptcy. They
offer two alternatives in order to save some of the invested money:
Positive Framing
If Program A is adopted, $20,000 will be saved (certain outcome)
If Program B is adopted, there is a 1/3 probability that $60,000 will be saved
and a 2/3 probability that no money will be saved (risky outcome)
Negative Framing
If program A is adopted $40,000 will be lost (certain outcome)
If program B is adopted, there is a 1/3 probability that no money will be lost,
and 2/3 probability that $60,000 will be saved (risky outcome)
Cognitive Psychology, Fifth Edition, Robert J. Sternberg
Chapter 12
TRY IT!
Write your name on a piece of paper and indicate the truth of
the following statements
1 means you are sure it is true, 10 means you are sure it is false
Truth
Rating
1. Martin Luther King was 39 when he died.
2. The gestation period of an Asian elephant is 225 days.
3. The earth is the only planet in the solar system that has one moon.
4. The number of lightning strikes in the United states per year is 25
million.
5.The Rhöne is the longest river in Europe.
Collect the sheets.
Cognitive Psychology, Fifth Edition, Robert J. Sternberg
Chapter 12
TRY IT ANSWERS
Martin Luther King was 39 when he died
The gestation period of an Asian elephant is
not 225 days--It is 645 days
The earth is the only planet in the solar system
that has one moon. False, Pluto also has one
moon
The number of lightning strikes in US is
approximately 25 million
The Rhöne is not the longest river in Europe
Cognitive Psychology, Fifth Edition, Robert J. Sternberg
Chapter 12
ILLUSORY
CORRELATIONS
An illusory correlation is a perceived relationship
that does not, in fact, exist
Illusory correlations are formed by the pairing of two
distinctive events
Redelmeier and Tversky (1996)
18 arthritis patients observed over 15 months
The weather was also recorded
Most of the patients were certain that their condition was
correlated with the weather
The actual correlation was close to zero
What illusory correlations may affect your decisions?
Cognitive Psychology, Fifth Edition, Robert J. Sternberg
Chapter 12
DEMONSTRATION-
FUTURE EVENTS
Predict whether you will experience these events
this semester
1. Obtain an A in your favorite course.
2. Have an out-of-town friend visit you.
3. Lose more than ten pounds.
4. Drop a course after the 5th week.
5. Be the victim of a crime.
6. Get a parking or speeding ticket.
How confident are you of your judgment for each
item? (100%, 80%, 60%.....)
Cognitive Psychology, Fifth Edition, Robert J. Sternberg
Chapter 12
OVERCONFIDENCE
People tend to have unrealistic optimism
about their abilities, judgments and skills
Examine your confidence judgments about
future events asked on a previous slide—
are you confident your judgments are
accurate?
Cognitive Psychology, Fifth Edition, Robert J. Sternberg
Chapter 12
DUNN & STORY (1991)
Examined overconfidence of students
At beginning of the semester students were given 37 items like the ones on the
previous slide
At end of the semester, students were asked to indicate which events had
actually occurred
Cognitive Psychology, Fifth Edition, Robert J. Sternberg
Chapter 12
DUNN & STORY (1991)
Results indicated that all students exhibited
large tendencies toward overconfidence
Confidence influences how we make
decisions, yet our confidence may not be
based on a realistic estimate of events or
skills
Why is this a problem?
Cognitive Psychology, Fifth Edition, Robert J. Sternberg
Chapter 12
TRY IT AGAIN…PREDICT YOUR
PAST ANSWER
1 means you were sure it was true
10 means you were sure it was false
Your past
answer
1. Martin Luther King was 39 when he died.
2. The gestation period of an Asian elephant is 225 days.
3. The earth is the only planet in the solar system that has one moon.
4. The number of lightning strikes in the United states per year is 25
million.
5.The Rhöne is the longest river in Europe.
Cognitive Psychology, Fifth Edition, Robert J. Sternberg
Chapter 12
HINDSIGHT BIAS
The memory of how we acted previously changes
when we learn the outcome of an event
Cognitive Psychology, Fifth Edition, Robert J. Sternberg
Chapter 12
HINDSIGHT BIAS
Reconstruction after feedback theory (RAFT)
Proposed by Hoffrage,Hertwig & Gigerenzer (2000)
Allows us to remove clutter by tossing out inaccurate information
and embracing the right answers in our memory
