Report on
“The Psychology of
Judgment and Decision
Making”
MIS 696a
November 6, 2002
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
•Section VI:
•Conclusion
Decision Making
Common Traps
Introduction
“There is no such thing as context-free decision
making, All judgments and decisions rest on the
way we interpret the world......”
Scott Plous
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.......
Section I:
“We do not first see, then
define, we define first and
then see.”
Walter Lippmann
Perception, Memory,
and Context
We all Experience Selective
Perception at Some Time


We Generally See what we Expect to See
•
•
•
•
Perceptual Denial
Compromise
Disruption
Recognition
Dominant Reaction
Part Right, Part Not
Rare, Little or No Perception
Incongruity may be misinterpreted
We Generally Experience what we Expect to
Experience
•
If told we are drinking, many of us will act like it!
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.
We Also can Suffer From
Cognitive Dissonance

When do people experience “Cognitive
Dissonance”?
- when they simultaneously hold 2 thoughts that are
psychologically inconsistent …
Cognitive Dissonance Theory

Proposed by Leon Festinger (1950)

A “Motivational Theory”

People try to justify the
inconsistency between
2 conflicting thoughts
… Natural Motivation
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.
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”
Aronson suggests …

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
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
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
Hindsight
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
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
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
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
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
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
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.
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
Section 2: How Questions
Affect Answers




Effect of question framing and wording
Factors that affect an answers
Inconsistencies about attitude
Implications for research
Factors affecting answers





Order of questions
Context in which question appeared
Question format, open or closed
Presence of filters
Presence of catch phrases
Factors affecting answers




Range of response alternatives
Order of response alternatives
Presence of middle categories
Framing in terms of gains or losses
Attitude Inconsistency

Attitude-Attitude inconsistency

Attitude-Behavior inconsistency
• Abstract attitude unrelated to specific cases
• Attitude not usually related to behavior
Implications for research



Aware of factors that effect results
Compare results from multiple
procedures
Measure behavior than attitude
Section III: Models and Decision
Making
 Expected
Utility Theory
 Describes How People Would
Behave if they Thought
Rationally
 Jon Von Neumann, Oskar
Morgenstern (1947)
The Rational Decision Making
Model
Rational D Model
Compare
Ordering Alternatives
Dominance
Cancellation
Transitivity
Continuity
Invariance
Reality
Actual Events
Feedback - Modify
It’s Wrong
What’s Wrong
With The
Rational
Decision
Making Model
Paradoxes in Decision Making
Allais Paradox
1
Alternative A: $1 Million For Sure
2
Alternative A: 11% - $1 Million | 89% - $0
Alternative B: 10% - $2.5 Million | 89% - $1 Million | 1% - $0
Alternative B: 10% - $2.5 Million | 90% - $0
Violates the RDM Cancellation Principle
RDM Predicts: 1- A then 2-A
Reality: 1-A, 2- B
Prospect Theory
Value
Prospect Theory
Value Function
-$500
Gains
Losses
+$500
Adapted from Kahneman and Tversky
Descriptive Models
Descriptive Decision Making Models

Satisficing

Certainty Effect

Pseudocertainty

Regret Theory
Multi Attribute
Choice
 Non-Compensatory
Strategies
 The More Important
Dimension

Lessons Learned
Lesson Learned
Section IV:
HEURISTIC AND BIASES

How do people come to their decisions?
Decision Making
Normative
theories
Heuristic
Answer
Representativeness Heuristic

Advantage:
• It reduces time and effort required for decision
making.

Disadvantage:
• It might lead to systematic biases.
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.
Conjunction fallacy
Feminist bank tellers
Bank
tellers
Feminists
“Specific scenarios appear more likely than general ones
because they are more representative of how we imagine
particular events.”
Gambler’s fallacy

The belief that a successful outcome is
due after a run of bad luck
Hot hand
A player has a better
successful chance after
having successful shots than
after having missed a shot
Neglecting base rates

A reliance on representativeness leads
people to ignore “base rate” information
Nonregressive prediction
Extreme performances tend to be
followed by more average performances
“Sports Illustrated Jinx”
Availability Heuristic

Most people estimate the frequency of
an event by how easy it is to bring
instances of the event to mind
Imaginative prediction
#8 in Reader Survey about causes of
death
• diabetes or homicide
• tornado or lightning
• car accident or stomach cancer
Imaginative prediction
Overestimate
-easy to visualize
-vividness
Underestimate
-hard to imagine
-horrifying imagine
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
Chapter 12: Probability and Risk

Confusion of inverse
Example: 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
Probability

Positive outcomes vs. negative outcomes
Compound events

Conservatism

• Conjunctive: A and B
• Disjunctive: A or B
• The tendency: overestimate vs. underestimate
Slowness to revise prior probability estimates
Risk

Highly subjective

Biased in the direction of preexisting views
• “voluntary” risk: from smoking, skiing
• “involuntary” risk: from electric power generation
• Technology supporters vs. opponents
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
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
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
Implications for MIS

Anchor values in our research

How to avoid
• Previous results that are unusually high or low
• Generate an alternative anchor value in the
•
opposite direction
Consider multiple anchors
Section V
The Social Side of Judgment
And Decision Making
By Jason J. Li
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?
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!
* Choose an appropriate
environment according to
the complexity of task.
Please leave me alone!
I can’t focus!
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.
I don’t have to work as
hard as before.
It’s none of my
business!
* Clarify everyone’s responsibility in a research group.
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!
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.
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?
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.
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.
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
situation
Be careful not to see patterns where they do
not exist. Seeing a ‘hot hand’ may get you in
‘hot water’.
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.”
 Both Illusory Correlations and
Invisible Correlations are dangerous

p. 163
Avoid ‘Causalation’
=
“Just as correlation need not imply
a causal connection, causation
need not imply a strong correlation”
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
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?
The Fundamental Attribution Error
Joe has trouble
reading directions
This is a really
complex gizmo
Joe
John
John couldn’t
put together a
sandwich
There must be
parts missing…
John
Joe
Other Attribution Errors



Self-Serving Bias
I invented the
Internet!!!
Egocentric Bias
I contributed
much more than
my colleagues
• Co-authoring!
Positivity Bias
I couldn’t have
done it
alone…well,
maybe…
Could the
economy be
any worse?
Avoiding Attribution Pitfalls
Don’t ignore consensus information
 Ask “How would I have behaved?”
 Be sure to look for hidden causes,
not just the most salient ones

Section VI: Common Traps
Common problems
that beset decision makers
Examples of Overconfidence

Chernobyl Nuclear Disaster (April 25th -26th, 1986 Ukraine)
P[ meltdown of the reactor ] <=1/10,000

Challenger Accident
(January 28th , 1986 )
P[ catastrophic launch failure ] <=1/100,000

Attack on Pearl Harbor

No problem in judgment and decision making is more
prevalent and more potentially catastrophic than
overconfidence
(Dec. 7th, 1941 Oahu Hawaii)
Confidence & Accuracy
Confidence increased with the amount of information subjects
read, but accuracy did not
60
Percentage of questions correct

True accuracy
Estimated accuracy
50
40
30
20
10
0
1
2
3
4
Amount of case study read by subjects
Overconfidence in research

Overconfidence in literature review
What you have read is far from enough

Overconfidence in doctoral dissertation
management
Just Do It !
Confirmation Bias
“If a card has a vowel on one side, then it has an even number on the other side”
If a card has a odd number on one side, then it has a consonant on the other side
Which of the cards
would you need to turn
over in order to decide
whether the person is
lying?
E K
4
7
Def: Confirmation bias
refers to a preference
for information that is
consistent with a rule
rather than information
which opposes it
Confirmation Bias in research

Hypothesis Testing
Positive test strategy VS. Negative test strategy
Confirmation Bias
Better Result
Behavioral traps





Time delay traps
Ignorance traps
Investment traps
Deterioration traps
Collective traps
(Gross and Guyer, 1980)
Examples of behavioral traps

Time delay traps: Euphoria of drinking vs. Next
day’s hangover

Ignorance traps: Smoking

Investment traps: “Sunk cost effect”

Deterioration traps: Heroin addiction

vs. Lung Cancer
Collective traps: Rush-hour traffic
Behavioral traps in research

Behavioral traps almost
happen everyday

Traps are not always bad:
intentionally trapping ourselves
in an active and healthy
research life
Lets face it, we are all human!
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!
Conclusion
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.
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.
Conclusion
Generally Unbiased Q & A