Judgemnet and Decision Making
Judgemnet and Decision Making
Judgemnet and Decision Making
Decoding the Tapestry of Decision-Making: Insights into Biases, Emotions, Models, and Group
Dynamics
Group members:
Anshooba Rahmat
Aqsa Bibi
Lageen khan
Mahnoor Khan
Malaika Ali
Manal Gauhar
Sidra Shah
Tooba Zeb
University of Swat
Page numbers: 20
Judgement:
The ability to estimate or predict character of unknown events-Judgement underlines decision.
Decision-making:
Assessing and choosing among several alternatives.
COGNITIVE BIASES
The cognitive biases would be a pattern of deviation in judgment, in which the inferences we make about
other people and/or situations can be illogical.
Introduction:
The term "cognitive biases" was introduced by psychologists Amos Tversky and Daniel Kahneman. They
conducted groundbreaking research in the 1970s, challenging traditional views of rational decision-
making. Their work highlighted systematic patterns of deviation from rationality, leading to the
identification of cognitive biases—mental shortcuts and errors in judgment that affect human decision-
making. Tversky and Kahneman's contributions have had a significant impact on psychology, economics,
and decision science, earning Kahneman the Nobel Prize in Economic Sciences in 2002.
Definition:
Cognitive biases are systematic patterns of deviation from norm or rationality in judgment,
influencing decision-making processes by introducing consistent errors or distortions in thinking.
1. Confirmation biases:
The tendency to selectively search for or interpret information in a way that confirms one’s
preconceptions or hypothesis, preexisting beliefs, potentially reinforcing cognitive errors. .
People display this bias when they gather or remember information selectively.
Example:
One day, they come across an article from a reputable source presenting an alternative perspective or
conflicting information about a key policy supported by their political ideology. However, instead of
critically evaluating the new information, the person may choose to:
1) Ignore the Information: They might dismiss the article without fully reading it or considering
its arguments.
2) Downplay the Source: They might question the credibility of the source, labeling it as biased or
untrustworthy.
3) Seek Reassurance: They may actively seek out other sources that confirm their original beliefs,
seeking reassurance rather than challenging their views.
In this scenario, the individual is exhibiting confirmation bias by selectively favoring information that
aligns with their existing political beliefs and avoiding or discrediting information that challenges those
beliefs. This bias can contribute to the reinforcement of preexisting attitudes, potentially hindering open-
mindedness and a balanced understanding of different perspectives.
2. Anchoring biases:
The tendency to rely too heavily or “anchor” on one trait or piece of information when making
decisions.
Anchoring heuristic is used in numerical prediction in when a relevant value is available,
Example:
In this experiment, participants were asked to estimate the product of the numbers 1 x 2 x 3 x 4 x 5 x 6 x
7 x 8, but with a twist.
Condition 1 (Low Anchor): Participants in one group were asked to estimate the product after seeing
the following prompt: "Is the product of 1 x 2 x 3 x 4 x 5 x 6 x 7 x 8 greater or less than 500?"
Condition 2 (High Anchor): Another group of participants was asked the same multiplication question
but with a different anchor: "Is the product of 1 x 2 x 3 x 4 x 5 x 6 x 7 x 8 greater or less than 5,000
Here's the key finding:
Participants in Condition 1, exposed to the low anchor of 500, tended to give lower estimates for the
multiplication, influenced by the low anchor.
Participants in Condition 2, exposed to the high anchor of 5,000, tended to give higher estimates,
influenced by the high anchor.
This experiment demonstrated that the initial anchor provided influenced participants' subsequent
estimates, even though the anchor was arbitrary and unrelated to the actual multiplication. It highlighted
how people's judgments can be swayed by the context or information presented to them, showcasing the
anchoring bias.
3. Availability bias:
Accessibility would be given when the frequency of a class or the probability of an event is
judged by its ability to be evoked. That is people would remember the events that happen more
easily than those event that hardly occur.
So, it is observed a tendency to choose the option which is the most available in the memory.
Many times these decisions are also influenced by recent memories, in familiar events and
emotionally charged.
Example:
Imagine a person is planning a vacation and trying to decide on the mode of transportation. They recently
watched a news report about a plane crash, and the vivid images and emotional impact of the news story
are still fresh in their memory. As a result, the availability bias might influence their decision-making in the
following ways:
Decision: The person decides to travel by car instead of taking a plane for their vacation because the
plane crash story is more vivid and easily recalled.
Overemphasis on Rare Events: Despite statistically knowing that plane crashes are extremely rare
compared to car accidents, the person's decision is influenced by the recent, emotionally charged
information about the plane crash.
In this scenario, the availability bias is at play as the person's decision is disproportionately influenced by
information that is readily available (the plane crash news) rather than a more comprehensive and
statistically grounded assessment of the risks associated with each mode of transportation.
4. Ambiguity Effect:
The tendency to avoid or directly refuse the options for which missing information appears to
have an uncertain or unknown probability which has a favorable outcome.
Example:
Job Offer A: The salary and benefits are clearly outlined, and the job responsibilities are well-defined.
The company has a stable reputation in the industry.
Job Offer B: The salary is not specified, and the benefits are vaguely mentioned. The job responsibilities
are vaguely defined, and the company is relatively new with an unclear track record.
Despite Job Offer B potentially offering higher rewards or a more exciting opportunity, the person might
choose Job Offer A because it provides more clarity and certainty. The individual is influenced by the
ambiguity effect, preferring the option with known and clearly defined terms over the one with
uncertainties, even if the uncertain option might have a higher potential payoff.
In this scenario, the ambiguity effect influences decision-making, as individuals tend to avoid situations
where the outcome is uncertain or ambiguous, opting instead for options with more clearly defined
parameters.
5. Overconfidence Bias:
The tendency to overestimate one's own abilities, knowledge, or the accuracy of one's beliefs
and predictions.
Example:
Prediction: Sarah predicts confidently to her friends, "I'm sure I'll get an A on the exam. I know this
material inside out."
Lack of Preparation: Instead of dedicating more time to thorough study and addressing her
uncertainties, Sarah relies on her perceived high level of understanding.
Outcome: When the exam results are later revealed, Sarah finds that she did not perform as well as she
confidently predicted. Her overconfidence in her knowledge did not align with the actual outcome.
In this scenario, overconfidence bias is evident as Sarah overestimates her mastery of the material,
leading her to underprepare for the exam. This bias can impact various areas of life, including academic
performance, financial decision-making, and professional judgments.
Reference:
PROSPECT THEORY
Prospect theory is a psychology theory that describes how people make decisions when presented
with alternatives that involve risk, probability, and uncertainty. It holds that people make decisions
based on perceived losses or gains.
Given the choice of equal probabilities, most people would choose to retain the wealth that they
already have, rather than risk the chance to increase their current wealth. People are usually averse
to the possibility of losing, such that they would rather avoid a loss rather than take a risk to make an
equivalent gain.
Given the choice of equal probabilities, most people would choose to retain the wealth that they
already have, rather than risk the chance to increase their current wealth. People are usually averse
to the possibility of losing, such that they would rather avoid a loss rather than take a risk to make an
equivalent gain.
The prospect theory is sometimes referred to as the loss-aversion theory. The theory was introduced
by two psychologists, Daniel Kahneman, and Amos Tversky, to describe how humans make decisions
when presented with several choices.
The theory was contained in the paper “Prospect Theory: An Analysis of Decision under Risk” that
was published in the “Econometrica” journal in 1979. Since it was developed, the prospect theory’s
been used in various disciplines. It is used to evaluate various aspects of political decision-making in
international relations.
The theory describes the decision-making process in two phases, which include:
1. Editing phase
The editing phase refers to how people involved in decision-making characterize the options for
choice or the framing effects. The effects explain how a person’s choice is influenced by the wording,
order, or method in which the choices are presented.
An example to demonstrate the framing effect can be the choices that cancer patients are given.
Usually, cancer patients are presented with the choice of undergoing surgery or chemotherapy to
treat their illnesses, and they make a decision based on whether the outcome statistics are
presented in terms of survival rates or mortality rates. Once the choices have been framed ready for
decision-making, the theory enters the second phase.
2. Evaluation phase
In the evaluation phase, people tend to behave as if they would make a decision based on the
potential outcomes and choose the option with a higher utility. The phase uses statistical analysis to
measure and compare the outcomes of each prospect. The evaluation phase comprises two indices,
i.e., the value function and the weighting function, which are used to compare the prospects.
1. Certainty
When presented with several options to choose from, humans show a strong preference for the
option with certainty. They are willing to sacrifice the option that offers more potential income in
order to achieve more certainty. For example, assume that a lottery provides two options, A and B.
Option A provides a guaranteed win of $100 while option B provides the possibility of winning $200,
with a 70% chance of winning and 30% chance of losing. Most people will choose option A since it
provides a guaranteed win, even though it offers a lower return compared to B.
2. Small probabilities
People tend to discount very small probabilities even if there is a possibility of losing all their wealth.
By discounting the small probabilities, people end up choosing higher-risk options with higher
probabilities.
3. Relative positioning
Relative positioning means that people tend to focus less on their final income or wealth, and more
on the relative gains or losses that they will get. If their relative position does not improve with
increases in income, they will not feel better off. This means that people tend to compare
themselves to their neighbors, friends, and family members, and are less interested in whether they
are better off than they were some years back.
For example, if everybody in the office gets a 20% raise, no individual will feel better off. However, if
the person gets a 10% raise, and other people fail to get a raise, that person will feel better off and
richer than everyone else.
4. Loss aversion
People tend to give more weight to losses rather than gains made by taking a certain option. For
example, if a person makes $200 in profits and $100 in losses, the person will focus on the loss even
though they emerged with a $100 net gain. This shows that people are more concerned about losses
rather than gains.
One of the criticisms of the prospects theory is that it lacks psychological explanations for the
process it talks about. The criticism comes from other psychologists who notes that factors such as
human emotional and affective responses that are important in the decision-making process are
absent in the model.
The theory is also criticized for the inadequate framing theory that explains why actors generate the
frames they use. Decision-makers often need to deal with competing frames across various issues.
REFERENCE
Tversky A., and Kahneman, D. (1992). Advances in Prospect Theory: Cumulative Representation of
Uncertainty. Journal of Risk and Uncertainty. 5, 297-323
Composed by Sidra Shah
EMOTIONAL INFLUENCES
Let's dive into the fascinating world of emotional influences and their connection to the psychological
aspect of judgment and decision-making.
2. Emotional Intelligence:
What is emotional intelligence, and how does it relate to our ability to understand and manage
our emotions? We can explore the different components of emotional intelligence and how it
affects our decision-making skills and interpersonal relationships.
Judgement making model is a structured framework or process that individual or groups use to analyze
information, evaluate alternatives and choose a course of action in order to make decisions. These models
provide systematic approaches to guide decision-makers through the complex task of choosing the most
suitable option based on their goals, preferences and available information. Different decision-making
models exists, such as;
Bounded rationality
Definition: Assumes individuals make decisions by systematically analyzing all available information and
options to choose the optimal solution.
Process: Involves identifying the problem, generating alternatives, evaluating and comparing
alternatives, and selecting the best option based on a rational evaluation.
Pros: Systematic, logical, aims for optimal outcomes.
Cons: Assumes perfect information and may not be practical in complex, real-world situations.
2) Bounded Rationality:
Definition: Acknowledges that individuals have limitations in processing information and making
decisions due to time, cognitive constraints, and the complexity of the decision.
Process: Decision-makers satisfice (choose a satisfactory option) rather than optimize,
considering a limited set of alternatives and using heuristics to simplify the decision-making
process.
Pros: Reflects the reality of human cognitive limitations, more feasible in complex situations.
Cons: May lead to suboptimal outcomes, doesn't guarantee the best decision.
Definition: Involves making decisions based on intuition, gut feelings, and previous experiences
rather than a systematic analysis of information.
Process: Relies on quick, unconscious processing of information, often without explicit reasoning
or conscious evaluation.
Pros: Rapid decision-making, effective in situations where expertise and experience are critical.
Cons: Subject to biases, may not be suitable for unfamiliar or highly complex situations.
Comparison:
Contrast:
Approach: Rationality follows a systematic approach, bounded rationality simplifies, and intuition
relies on quick, instinctive judgments.
Decision Speed: Rationality may take time, bounded rationality balances speed and analysis,
while intuition is rapid.
Use in Complexity: Rationality may struggle in complex situations, bounded rationality simplifies,
and intuition relies on experience in complex contexts.
In practice, decision-making often involves a combination of these models based on the context and
available resources.
Composed by Tooba Zeb,
HEURISTICS
What Is a Heuristic?
Cat Box/Shutterstock
As humans move throughout the world, they must process large amounts of information and make many
choices with limited amounts of time. When information is missing, or an immediate decision is
necessary, heuristics act as “rules of thumb” that guide behavior down the most efficient pathway.
Heuristics are not unique to humans; animals use heuristics that, though less complex, also serve to
simplify decision-making and reduce cognitive load.
The study of heuristics was developed by renowned psychologists Daniel Kahneman and Amos Tversky.
Starting in the 1970s, Kahneman and Tversky identified several different kinds of heuristics, most notably
the availability heuristic and the anchoring heuristic.
Since then, researchers have continued their work and identified many different kinds of heuristics,
including:
Familiarity heuristic
Representativeness heuristic
Satisficing
Heuristics, while useful, are imperfect; if relied on too heavily, they can result in incorrect judgments or
cognitive biases. Some are more likely to steer people wrong than others.
Assuming, for example, that child abductions are common because they’re frequently reported on the
news—an example of the availability heuristic—may trigger unnecessary fear or overprotective parenting
practices. Understanding commonly unhelpful heuristics, and identifying situations where they could
affect behavior, may help individuals avoid such mental pitfalls.
The availability heuristic describes the mental shortcut in which someone estimates whether something is
likely to occur based on how readily examples come to mind. People tend to overestimate the probability
of plane crashes, homicides, and shark attacks, for instance, because examples of such events are easily
remembered.
Importance Of Heuristics
Heuristics are infamous for producing cognitive biases due to data limitations, which cause people and
corporations to make poor decisions. Understanding the notion is therefore critical to avoid such a
predicament and participate in more adaptive activities. It is worth noting that mental shortcuts, i.e.,
readily and widely available information, aid in making quick decisions in difficult circumstances or finding
appropriate solutions to complex problems with limited time and resources.
Heuristics Examples
Example #1
In the first heuristics example, we take the case of a mother named Maria. Maria appeared to be terrified
of the daily news reports of child abductions in the neighborhood. She became fearful and began locking
her children inside. Maria became more cautious and vigilant as a result of the availability heuristic. So
she devised a strategy to avoid her children becoming the next to be kidnapped from the neighborhood.
Example #2
The availability heuristics decision making plays a crucial role in artificial intelligence (AI). It encourages
cognitive bias or rationalization, leading to the logical interpretation of the resources or data available.
Even
Compose by Malaika Ali,
We are going to explore some of the important ways that being in a group affects individual group
members’ behavior, in turn influences overall group performance, another important task of groups is to
make decisions.
On important factors that helps groups to outperform individuals on decision making tasks in the type of
interdependence they have. In general positive independent groups tend to make better decisions than
both negatively.
Interdependent groups and individuals particularly in complex tasks, this process gains from a variety of
factors. One is that when group members interact, they often generate new ideas and solutions that they
would not have arrived at individually.
Groupthink:
Groups can make effective decisions only when they are able to make use of the advantages outlined
above that come with group membership. Groupthink occurs when a group that is made up of members
who may actually be competent and quite capable of making a poor one as a result of flawed group
process and strong conformity pressure.
Information Sharing:
Although group discussion generally improves group’s decision this will only be true if the group discusses
information that is most useful to the discussion that needs to be made. In addition to the pressures to
focus on information that comes from leaders and that is consistent with group norms.
The problem is that group members tends to discuss information that all have access to while ignoring
equally important information that is available only to a few of the members.
Ineffective brainstorming:
One technique that is frequently used to produce creative decisions in working groups is called brain
storming.
The technique was first developed by Osborn (1953) in an attempt to increase the effectiveness of group
sessions at his advertising agency.
Each group member was to create as many ideas as possible no matter how sill, unimportant or
unworkable they were thought to be.
As many ideas as possible were to be generated by the group.
NEUROSCIENCE OF DECISION-MAKING
Neuroscience in decision making is the study of how our brain processes information and influences the
choices we make. It explores the neural mechanisms and processes involved in decision making, such as
cognitive functions, emotions, and the impact of external factors. By understanding the neuroscience
behind decision making, researchers aim to uncover the underlying mechanisms and improve our
understanding of human behavior.
When we make decisions, our brain goes through a complex process involving several regions. One
important area is the prefrontal cortex, which is responsible for reasoning, planning, and evaluating
options. It helps us weigh the pros and cons of different choices.
There are several subtopics within neuroscience and decision making. Some of them include:
1. Cognitive processes:
This subtopic focuses on understanding how cognitive functions, such as attention,
memory, and reasoning, contribute to decision making.
2. Emotional influences:
This subtopic examines the role of emotions in decision making and how they can
impact our choices and preferences.
3. Neural mechanisms:
This subtopic delves into the specific brain regions and neural networks involved in
decision making, such as the prefrontal cortex, limbic system, and reward pathways.
Understanding how neural plasticity affects decision making can shed light on how we can learn from past
experiences and make more informed choices in the future.
Composed by Aqsa ,
TEMPORAL DISCOUNTING
Introduction:
Temporal discounting, the cognitive bias that leads individuals to assign lower value to delayed
rewards or costs, stands as a key determinant in shaping decision-making processes.
Factors Influencing Temporal Discounting:
Neurobiological Basis:
Delving into the neurobiological underpinnings, temporal discounting involves specific brain
regions and neural mechanisms, providing insights into the intricate processes that influence
decision-making at a neural level.
The tangible impact of temporal discounting spans diverse domains, from financial choices to
health-related decisions and the dynamics of interpersonal relationships, showcasing its pervasive
influence on decision outcomes.
Developmental Perspective:
The evolution of temporal discounting across the lifespan introduces a dynamic element,
influencing decision-making behaviors at various life stages and contributing to a nuanced
understanding of this temporal phenomenon.
Cultural influences play a pivotal role in shaping temporal discounting tendencies, unveiling global
variations in decision-making processes and emphasizing the importance of a culturally sensitive
approach in studying this cognitive bias.
Future Directions:
Future research endeavors should focus on uncharted territories, addressing existing challenges
and refining our understanding of temporal discounting, thereby contributing to the advancement of
decision science.
Conclusion:
The recognition of temporal discounting's pivotal role underscores its significance in deciphering
human behavior and decision-making, highlighting the perpetual relevance of ongoing research in
this intriguing and impactful field.
Epilogue:
This serves as the epilogue to our journey through decision-making, revealing the depth of
influences that shape our choices.