By Max H. Bazerman
What Would a Rational Decision Look Like?
Biases in Our Decision Process
Problem 1 (adapted from Alpert & Raiffa, 1969):
Problem 2 (adapted from Joyce & Biddle, 1981):
Problem 3 (adapted from Tversky & Kahneman, 1981):
Fixing Our Decisions
- Book: Bazerman, M. H., & Moore, D. (2013). Judgment in managerial decision making (8th ed.). John Wiley & Sons Inc.
- Book: Kahneman, D. (2011) Thinking, Fast and Slow. New York, NY: Farrar, Straus and Giroux.
- Book: Thaler, R. H., & Sunstein, C. R. (2008). Nudge: Improving Decisions about Health, Wealth, and Happiness. New Haven, CT: Yale University Press.
- The bias to be affected by an initial anchor, even if the anchor is arbitrary, and to insufficiently adjust our judgments away from that anchor.
- The systematic and predictable mistakes that influence the judgment of even very talented human beings.
- Bounded awareness
- The systematic ways in which we fail to notice obvious and important information that is available to us.
- Bounded ethicality
- The systematic ways in which our ethics are limited in ways we are not even aware of ourselves.
- Bounded rationality
- Model of human behavior that suggests that humans try to make rational decisions but are bounded due to cognitive limitations.
- Bounded self-interest
- The systematic and predictable ways in which we care about the outcomes of others.
- Bounded willpower
- The tendency to place greater weight on present concerns rather than future concerns.
- The bias to be systematically affected by the way in which information is presented, while holding the objective information constant.
- cognitive (or thinking) strategies that simplify decision making by using mental short-cuts
- The bias to have greater confidence in your judgment than is warranted based on a rational assessment.
- System 1
- Our intuitive decision-making system, which is typically fast, automatic, effortless, implicit, and emotional.
- System 2
- Our more deliberative decision-making system, which is slower, conscious, effortful, explicit, and logical.