Decision Making: Factors that Influence Decision Making, Heuristics Used, and Decision Outcomes

By Cindy Dietrich
2010, Vol. 2 No. 02 | pg. 2/3 |

Decision Making Heuristics

Heuristics are general decision making strategies people use that are based on little information, yet very often correct; heuristics are mental short cuts that reduce the cognitive burden associated with decision making (Shah & Oppenheimer, 2008). Shah and Oppenheimer argued that heuristics reduce work in decision making in several ways. Heuristics offer the user the ability to scrutinize few signals and/or alternative choices in decision making. In addition, heuristics diminish the work of retrieving and storing information in memory; streamlining the decision making process by reducing the amount of integrated information necessary in making the choice or passing judgment (Shah & Oppenheimer, 2008).

As a result of research and theorizing, cognitive psychologists have outlined a host of heuristics people use in decision making. Heuristics range from general to very specific and serve various functions. The price heuristic, in which people judge higher priced items to have higher quality than lower priced things, is specific to consumer patterns; while the outrage heuristic, in which people consider how contemptible a is when deciding on the punishment (Shah, & Oppenheimer, 2008). According to Shah and Oppenheimer three important heuristics are the representative, availability, and anchoring and adjustment heuristics.

In decision making, people rely on a host of heuristics for convenience and speed. One important heuristic is the representative heuristic (RH), which is an extremely economical heuristics (Pachur, & Hertwig, 2006). In the event that one of two things is recognizable, people will tend to choose the recognized thing; utilizing or arriving at a decision with the least amount of effort or information (Goldstein & Gigerenzer, 2002; Hilbig & Pohl, 2008). Hilbig and Pohl remarked that it is difficult to research and answer definitively if an individual is using the RH alone, or if the person is using other information in drawing a conclusion. As a result, the research on the RH is mixed (Goldstein & Gigerenzer, 2002; see also Hilbig & Pohl, 2006). Goldstein and Gigerenzer provided seminal research on the RH. They maintained recognition memory is perceptive, reliable, and more accurate than chance alone; they argued less recognition leads to more correct decisions. On the other hand, according to Hilbig and Pohl, people often use additional information when utilizing the RH; that is, they do not rely solely on recognition along in decision making. Further, Hilbig and Pohl concluded that even when sound recognition was established, people use additional information, in conjunction with the RH.

Another highly researched heuristic is the availability heuristic. According to this heuristic, people are inclined to retrieve information that is most readily available in making a decision (Redelmeier, 2005). Interestingly, this is an important heuristic, as it is the basis for many of our judgments and decisions (McKelvie, 2000; Redelmeier, 2005). For example, when people are asked to read a list, then identify names from the list, often, the names identified are names of famous individuals, with which the participants are familiar (McKelvie, 2000). In the field of medicine, Redelmeier charged that missed medical diagnoses are often attributable to heuristics, the availability heuristic being one of those responsible. Redelmeier explained heuristics are beneficial as they are cognitively economical, but cautioned clinicians and practitioners need to recognize when heuristics need to be over-ridden in favor of more comprehensive decision making approaches.

The anchoring and adjustment heuristic is the foundational decision making heuristic in situations where some estimate of value is needed (Epley, & Gilovich, 2006). In this particular heuristic, individuals first use an anchor, or some ball park estimate that surfaces initially, and adjusts their estimates until a satisfactory answer is reached. For example, if a person were asked to answer the question, “In what year did John F. Kennedy take office?” the anchoring and adjustment heurist would be used. The person may start with a known date, such as the date he was shot, November 22, 1963; then make an estimate based on the known information (Epley, & Gilovich, 2006). The practical application of the anchoring and adjustment heuristic is in negotiations; people make counter offers based on the anchor that is provided to them. Epley and Gilovich explained often people tend to make estimates which tend to gravitate towards the anchor side, where actual values tend to be farther away from the anchor initially planted. Further, anchoring requires effort; such work is important in avoiding anchor bias.

After the Decision

After a decision is made, people experience a variety of reactions. In addition, present decisions influence future decision making. Several of the outcomes that may result from a decision are regret or satisfaction; both of which influence upcoming decisions.

Regret, feelings of disappointment or dissatisfaction with a choice made is one potential outcome of decision making. Interestingly, regret may shape the decision making process. According to Abraham and Sheeran (2003), anticipated regret is the belief that the decision will be result of inaction. Anticipated regret may prompt behavior; that is, when a person indicates they will do something, such as exercise, they may follow through with their intended decision, to avoid regret. Once the decision is made, the impact of the decision, if regret is experienced, will impact future decisions. People can often get consumed with examining the other options that were available; the path not taken (Sagi & Friedland, 2007).

Sagi and Friedland (2007) theorized people feel regret in accordance with how the decision was made; regret may be dependent on the number of options that were available during the decision making process; and how varied the options were may impact how regret is experienced after the decision was made. Through a series of experiments, Sagi and Friedland concluded that people feel remorse because they feel they were able to make a better choice by looking at more information, previously disregarded, and carefully weighing the pros and cons of each choice. In addition, regret is magnified when individuals revisit the other available options and considering what satisfaction the other option would have brought them. Interestingly, people who are dissatisfied with their decision feel obligated to embrace the decision, as a means to reducing anxiety regarding the quality of the decision (Botti & Iyengar, 2004; see also Gilbert & Ebert, 2002). For example, when a job applicant does not get hired, he may restructure the experience, and find many reasons that explain why he did not want to work for the company.

In addition to regret, individuals may also experience satisfaction with their decisions. Satisfaction refers to how pleased the decision maker is with the outcome of the decision. There are many things that impact levels of satisfaction. Botti and Iyengar (2004) observed individuals prefer to make their own decisions and believe they will be more satisfied with their choices; however, when people are given only undesirable options, decision makers are less satisfied than those who have had the choice made for them. Botti and Iyengar posited the explanation for this phenomenon is that the decision maker assumes responsibility for the decision made. As a result, if the available choices are bad, they may feel as though they are responsible for making poor choices.

Also fascinating, aside from heuristics, an important decision making strategy is evaluating positive and negative aspects of choices. Kim et al. (2008) discovered that when younger and older adults use this strategy, older adults tend to list more positive and fewer negative aspects of each choice, and older adults register more satisfaction with their choices when they use this evaluative strategy. One interesting finding was when the participants did not evaluate the options by listing the positive and negative features; there was no age difference in satisfaction (Kim et al., 2008).

As explained, future decision making is based on past decisions, as well as levels of satisfaction or regret (Abraham & Sheeran, 2003; Juliusson, Karlsson, & Garling, 2005; Sagi & Friedland, 2007). Even though there is evidence to support this notion, in many cases, particularly when the decision may be reversed, decisions may be based on the reversibility factor (Gilbert, & Ebert, 2002). Significant to individuals’ satisfaction is that people are willing to pay a premium for the opportunity to change their minds at a later date (Wood, 2001). For example, catalogue shoppers purchase items in a two step process; first they decide to purchase the items, then once the items arrive, they decide if they will keep them. Gilbert and Ebert examined if people prefer making decisions that are reversible. They concluded that people do prefer to have the option to change their minds; although people’s ability to change their minds actually inhibits their ability to be satisfied with their choice.

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