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Report on “The Psychology of Judgment
and Decision Making”
MIS 696a
November 6, 2002
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Order of Business
•Introduction
•Section I: Perception, Memory, and Context
•Section II: How Questions Affect Answers
•Section III: Models and Decision Making
•Section IV: Heuristics and Biases
•Section V: The Social Side of Judgment and Decision Making
•Section VI: Common Traps
•Conclusion
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Introduction
Whether we work individually, or in groups...
Whether we are considering:
Perception, Memory, Context,
The Phrasing of Questions,
or The Making of Decisions...
We use Heuristics, have our Biases,
are subject to Social and Group Influences,
and can fall prey to many, many Traps and Pitfalls.......
“There is no such thing as context-free decision making, All judgments and decisions rest on the way we interpret the world......” Scott Plous
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Section I:
Perception, Memory, and Context
“We do not first see, then define, we define first and then see.”
Walter Lippmann
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We all Experience Selective Perception at Some Time
We Generally See what we Expect to See• Perceptual Denial Dominant Reaction
• Compromise Part Right, Part Not
• Disruption Rare, Little or No Perception
• Recognition Incongruity may be misinterpreted
We Generally Experience what we Expect to Experience• If told we are drinking, many of us will act like it!
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And Selective Perception can be Significant Research Trap
When conducting research, if we expect to see, or are motivated to see specific results, we are very likely to see those results!• You should understand your motivations and
expectations going into a research project, and control for their possible influence on your interpretation of results.• Assume you are biased, at least a bit.
• Ask yourself how you would have interpreted the data if you didn’t have the motivations and expectations.
• Consult with peers who don’t share your motivations and expectations.
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We Also can Suffer From Cognitive Dissonance
When do people experience “Cognitive Dissonance”?
- when they simultaneously hold 2 thoughts that are psychologically inconsistent …
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Cognitive Dissonance Theory
Proposed by Leon Festinger (1950)
A “Motivational Theory”
People try to justify the inconsistency between 2 conflicting thoughts … Natural Motivation
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Self-Perception Theory Daryl Bem (mid ’60s)
Explains how people infer the causes of their behavior
Based on 2 main premises: People discover their attitudes, emotions & other internal
states by watching themselves behave in various situations
To the extent that internal cues are weak, ambiguous, or uninterpretable, people are in much the same position as an outside observer when making these inferences.
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Predecisional & Postdecisional Dissonance
Predecisional - Dissonance (or the prospect of dissonance) influences the decisions people make
• Become more “liberated” after “been there - done that”
Postdecisional - Dissonance (or the prospect of dissonance) follows a choice that has been already made
• Once you “commit” the decisions become more “correct”
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If you want someone to form more positive attitudes toward an object, get him/her to commit himself to own that object
If you want someone to soften his/her moral attitude toward some misdeed, tempt him/her so that he/she performs that deed; conversely, if you want someone to harden his moral attitudes toward a misdeed, tempt him/her – but not enough to induce him/her to commit the deed
Aronson suggests …
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What do we learn?
Changes in behavior can also lead to changes in attitude !!
Cognitive Dissonance can be helpful in managing resources – people Getting them to commit to the work will result in increased dedication & effort
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Memory
Memories are not fixed in storage, but re-constructed at the time of remembrance
Memories are inter-linked – its difficult to remember every detail separately, but easy to remember a general scenario
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Hindsight
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Hindsight Bias
“I-knew-it-all-along” effect
Tendency to view what has already happened as relatively inevitable and obvious – without realizing that retrospective knowledge of the outcome is influencing one’s judgment
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Reducing Hindsight Bias
Explicitly consider how past events might have turned out differently
If one only considers the reasons why something turned out as it did, he/she runs a good risk of overestimating how inevitable that outcome was and how likely similar outcomes are in the future
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What do we learn?
It is very crucial to ask relevant and exhaustive questions, considering different alternatives, to reduce “Hindsight Bias” in research work
It is equally necessary to maintain careful notes and records of past events (meetings, important conversations, etc.), in order to avoid biases in memory
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Context Dependence
Memory, by its very nature, highly dependent upon contextual factors
Decision makers interpret new information in light of past experience and the context in which the material occurs
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The Contrast Effect
Contrast Effect only occurs when the contrasted stimuli are similar to one another
e.g. a 5’10” sports announcer looks very short when interviewing a team of basketball players, but looks very tall when interviewing race horse jockeys
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The Primacy & Recency Effects General Relationship between the position an entry
occupies and the effect it has on judgments
First Impression counts• Assumption: First piece of information is more
important
If there is a time lag between the first piece of information and the last, last one leaves a lasting impression• Short-term memory overrides the long-term memory
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Halo Effects
We all have a number of general assumptions about what personality traits go together.
The likelihood is that we like to see positive characteristics going along with other positive ones and vice versa
Particularly powerful when we know relatively little about the person.
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What do we learn?
Any comprehensive analysis of judgment & decision making must take context effects into account
Keep an objective outlook towards your research – well grounded methodologies will help
Understand people’s subjectivity while conducting experiments
Don’t be a victim of Halo effects or do not try bank on the same as well…they are temporary
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Section 2: How Questions Affect Answers
Effect of question framing and wording Factors that affect an answers Inconsistencies about attitude Implications for research
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Factors affecting answers
Order of questions Context in which question appeared Question format, open or closed Presence of filters Presence of catch phrases
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Factors affecting answers
Range of response alternatives Order of response alternatives Presence of middle categories Framing in terms of gains or losses
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Attitude Inconsistency
Attitude-Attitude inconsistency• Abstract attitude unrelated to specific cases
Attitude-Behavior inconsistency• Attitude not usually related to behavior
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Implications for research
Aware of factors that effect results Compare results from multiple
procedures Measure behavior than attitude
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Section III: Models and Decision Making
Expected Utility TheoryDescribes How People Would
Behave if they Thought Rationally
Jon Von Neumann, Oskar Morgenstern (1947)
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The Rational Decision Making Model
Rational D Model
Ordering AlternativesDominanceCancellationTransitivityContinuityInvariance
Reality
Actual EventsActual Events
Compare
Feedback - Modify
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It’s Wrong
What’s Wrong With The Rational Decision Making Model
?
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Paradoxes in Decision Making
Allais ParadoxAlternative A: $1 Million For Sure
Alternative B: 10% - $2.5 Million | 89% - $1 Million | 1% - $0
Alternative A: 11% - $1 Million | 89% - $0
Alternative B: 10% - $2.5 Million | 90% - $0
1
2
RDM Predicts: 1- A then 2-A
Reality: 1-A, 2- B
Violates the RDM Cancellation Principle
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Prospect Theory
Losses Gains
Value
-$500
+$500
Prospect Theory
Value Function
Adapted from Kahneman and Tversky
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Descriptive Models
Satisficing
Certainty Effect
Pseudocertainty
Regret Theory
Multi Attribute Choice
Non-Compensatory
Strategies The More Important
Dimension
Descriptive Decision Making Models
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Lessons Learned
Lesson Learned
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Section IV: HEURISTIC AND BIASES
How do people come to their decisions?
Normative theories
Heuristic
Answer
Decision Making
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Representativeness Heuristic
Advantage:• It reduces time and effort required for decision
making.
Disadvantage:• It might lead to systematic biases.
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Conjunction fallacy
Linda is 31 years old, single, outspoken, and very bright. She majored in philosophy. As a student, she was deeply concerned with issues of discrimination and social justice , and also participated in antinuclear demonstrations. Please check off the most likely alternative.
Linda is a bank teller.
Linda is a bank teller and is active in the feminist movement.
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Conjunction fallacy
“Specific scenarios appear more likely than general ones because they are more representative of how we imagine particular events.”
Banktellers
Feminists
Feminist bank tellers
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Gambler’s fallacy
The belief that a successful outcome is due after a run of bad luck
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Hot hand
A player has a better successful chance after having successful shots than after having missed a shot
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Neglecting base rates
A reliance on representativeness leads people to ignore “base rate” information
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Nonregressive prediction
Extreme performances tend to be followed by more average performances
“Sports Illustrated Jinx”
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Availability Heuristic
Most people estimate the frequency of an event by how easy it is to bring instances of the event to mind
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Imaginative prediction
#8 in Reader Survey about causes of death
• diabetes or homicide
• tornado or lightning
• car accident or stomach cancer
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Imaginative prediction
Overestimate-easy to visualize
-vividness
Underestimate-hard to imagine
-horrifying imagine
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Conclusion
Don’t be misled by highly detailed scenarios Whenever possible, pay attention to base rates Remember that chance is not self-correcting Don’t misinterpret regression toward the mean Beware of wishful thinking
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Chapter 12: Probability and Risk
Confusion of inverseExample: Were the chances of cancer given a
positive test result roughly equals to the chances of a positive test result given cancer? No.
How to avoid• Bayes theorem
• Prior probability
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Probability
Positive outcomes vs. negative outcomes Compound events
• Conjunctive: A and B
• Disjunctive: A or B
• The tendency: overestimate vs. underestimate
ConservatismSlowness to revise prior probability estimates
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Risk
Highly subjective• “voluntary” risk: from smoking, skiing
• “involuntary” risk: from electric power generation
Biased in the direction of preexisting views• Technology supporters vs. opponents
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Implications for MIS
Avoid negative biases• Maintain accurate records
• minimize primacy and recency effects, availability biases
• Beware of wishful thinking
• Break compound events into simple events• System design
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Chapter 13: Anchoring and Adjustment
What?• Insufficient adjustment up or down from an
original starting value, or “anchor”
Effects of arbitrary anchors• Estimates on the performance at problem-
solving task
• Stake out extreme initial position
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Anchoring
Examples:How thick would a piece of paper be if it were folded in on itself 100 times, given an initial sheet of paper 0.1 millimeter thick?
• Most people give estimates less than a few yard.
• The correct answer is 1.27×1023 kilometers
Reason: adjust upward insufficiently
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Implications for MIS
Anchor values in our research• Previous results that are unusually high or low
How to avoid• Generate an alternative anchor value in the
opposite direction
• Consider multiple anchors
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Section V
The Social Side of Judgment And Decision Making
By Jason J. Li
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Chapter 17: Social Influences
People are social by nature, so their judgments and decisions are subject to social influences.
How are personal decision makings affected by social factors?
What shall we learn?
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Social Facilitation
The presence of onlookers tends to• enhance the performance of simple responses.
• but impair the performance of complex skills.
Hey! Watch this. It’s only a piece of cake!
Please leave me alone! I can’t focus!* Choose an appropriate
environment according to the complexity of task.
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Social Loafing
People do not work as hard in groups as they work alone. Diffusion of responsibility can have a powerful influence
on judgment and decision making.
Don’t look at me!
Someone else will do it. It’s none of my business!
I don’t have to work as hard as before.
* Clarify everyone’s responsibility in a research group.
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Social comparison theory
People have a need to evaluate their ability levels and the appropriateness of their opinions.
• In the absence of objective nonsocial standards, people compare themselves with others, especially with those who are similar to them.
* Benchmark with others’ research work.
* Difference: Metrics are necessary!
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How do people think in groups?
People tend to succumb the pressure of conformity. When groups are cohesive and relatively insulated
from the influence of outsiders, group loyalty and pressures to conform can lead to “Groupthink”.
* Keep our brain clear and rational!
* Resist the tend of Conformity & Groupthink.
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Chapter 18: Group Judgments And Decisions
Will a group make better judgments and decisions than an individual would?
Do groups operate wit the same heuristics and biases as individuals?
How to exert the potential of a group?
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Group Errors & Biases
Many individual-level heuristics and biases appear to operate with equal force in groups.
Group discussion often amplifies preexisting tendencies.
* Be careful of the individual-level biases in group judgment and decision making.
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Are N heads better than 1? Groups usually perform somewhat better than
average individuals; the best member of a group outperforms the group.
Average(Xi) < ΣXi < Max(Xi)
* Communication + Cooperation + Collaboration
* Encourages all group members to express an opinion.
* Use “Dictator Technique” in group research.
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The Perception of Randomness
Recognize the difference between the probability of a particular event occurring in a particular situation, and the probability of some similar event occurring in some similar situationBe careful not to see patterns where they do not exist. Seeing a ‘hot hand’ may get you in ‘hot water’.
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Correlation, Causation, and Control
“People often have difficulty assessing the covariation between two events, and they tend to rely heavily on positive occurrences of both events.” p. 163
Both and
are dangerous
Illusory CorrelationsInvisible Correlations
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Avoid ‘Causalation’
“Just as correlation need not imply a causal connection, causation
need not imply a strong correlation”
=
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CCC Guidelines
Focus not only on positive, confirming cases, but also on cases lacking these characteristics
Is the perceived relationship based on observations or expectations?
Carefully distinguish between correlation and causation. Remember correlation does not always mean causation
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Attribution Theory
Attribution is based on three sources of information:• Consensus: Do others behave similarly?
• Distinctiveness: Does the situation make a difference?
• Consistency: Does the same thing happen every time?
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The Fundamental Attribution Error
John Joe
Joe has trouble reading
directionsThis is a really complex gizmo
JoeJohn
John couldn’t put together a
sandwich
There must be parts missing…
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Other Attribution Errors
Self-Serving Bias
Egocentric Bias• Co-authoring!
Positivity Bias
I invented the Internet!!!
I contributed much more than my colleagues
I couldn’t have done it alone…well, maybe…
Could the economy be any worse?
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Avoiding Attribution Pitfalls
Don’t ignore consensus informationAsk “How would I have behaved?”Be sure to look for hidden causes,
not just the most salient ones
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Section VI: Common Traps
Common problems that beset decision makers
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Examples of Overconfidence
Chernobyl Nuclear Disaster (April 25th -26th, 1986 Ukraine)
Challenger Accident (January 28th , 1986 )
Attack on Pearl Harbor (Dec. 7th, 1941 Oahu Hawaii)
No problem in judgment and decision making is more prevalent and more potentially catastrophic than overconfidence
P[ meltdown of the reactor ] <=1/10,000
P[ catastrophic launch failure ] <=1/100,000
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Confidence & Accuracy Confidence increased with the amount of information subjects
read, but accuracy did not
0
10
20
30
40
50
60
1 2 3 4
Amount of case study read by subj ects
Perc
enta
ge o
f qu
esti
ons
corr
ect
True accuracyEsti mated accuracy
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Overconfidence in research
Overconfidence in literature review
What you have read is far from enough
Overconfidence in doctoral dissertation management
Just Do It !
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Confirmation Bias
E
4 7
K
“If a card has a vowel on one side, then it has an even number on the other side”
Which of the cards would you need to turn over in order to decide whether the person is lying?
If a card has a odd number on one side, then it has a consonant on the other side
Def: Confirmation bias refers to a preference for information that is consistent with a rule rather than information which opposes it
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Confirmation Bias in research
Hypothesis Testing
Positive test strategy VS. Negative test strategy
Confirmation Bias Better Result
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Behavioral traps
Time delay traps Ignorance traps Investment traps Deterioration traps Collective traps
(Gross and Guyer, 1980)
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Examples of behavioral traps Time delay traps: Euphoria of drinking vs. Next
day’s hangover
Ignorance traps: Smoking vs. Lung Cancer
Investment traps: “Sunk cost effect”
Deterioration traps: Heroin addiction
Collective traps: Rush-hour traffic
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Behavioral traps in research
Behavioral traps almost happen everyday
Traps are not always bad: intentionally trapping ourselves in an active and healthy research life
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Conclusion
There is no silver bullet to solve the fundamental problem: We are all human and rely on an extremely
complex tool, our mind, which has evolved over millions of years to perform many functions in such a
fashion that it facilitates individual and group survival, which does not necessarily equate to
scientific consistency and/or accuracy!
Lets face it, we are all human!
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Conclusion
There is one conciliation, the inherent biases our brain uses to rapidly form opinions and judgments can be held in check by actively examining them, by asking
what-if questions, by questioning our work and seeking other explanations.
We must shoulder the burden of having to hold our biases in check at all times. We can never tire of that burden, for when we cease to shoulder it then we are no longer scientists.
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Conclusion
Generally Unbiased Q & A