1.

Decision making: selecting one choice from a number of choices involv-

ing some level of uncertainty

2. The 3 phases of decision-making

(a) acquiring and perceiving relevant information

(b) generating and selecting hypotheses
(c) planning and selecting

3. Normative decision models: Assumes individuals act rationally in try-

ing to find the best solution to optimize outcome.

Utility - overall value or worth of a choice

Expected value - Utility the probability of the outcome.
Example: the decision to buy a lottery ticket may be determined
by how much the jackpot is worth times the probability of winning

4. Descriptive Decision Models: Assumes humans do not act rationally in

decision making

Framming effects - the way a problem is phrased affects the deci-

sion.
Example: Choice to have surgery is affected weather you are told
that you have a 60% chance of living, or told you have a 40%
chance of dying
Satisfying - making a decision that is just good enough without
taking the extra time and effort to do better.
Example: Decision to how well i should define a term

5. Heuristics and Biases: What are they?

Heuristics- are shortcuts that are not guaranteed to lead to the

best answer, but are more efficient that lead to biases.
Example: Use rule of thumb such as need a vowel to separate
constant sounds - mestys stymes system

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6. Information Processing Limits in Decision Making

(a) Cue reception and integration - cues from the environment are
placed in working memory (cues possess uncertainty).
Example: an engineer trying to identify the problem in a manu-
facturing process might receive a number of cues, including:-
unusual vibrations
particularly rapid tool wear
strange noises
(b) Hypothesis generation and selection - guesses about cues are made
drawing from long term memory while additional cues are col-
lected to test the hypothesis.
Example: an engineer might hypothesize that the set of cues de-
scribed above is caused by a worn bearing.
(c) Generating and selecting actions - alternative actions are gener-
ated by retrieving possibilities from long term memory.
Example: After diagnosing machine failure from bearing or other
selected hypotheses, several alternative actions are selected:-
waiting
conducting additional tests
performing overhaul maintenance

7. Heuristics and Biases in Receiving and Using Cues

(a) Attention to a limited number of cues - affected by the magical

number 7
(b) Cue primacy and anchoring - the first few cues are given greater
importance
(c) Inattention to later cues - cues occurring later in time or ones that
change over time are ignored; attributable to attentional factors
(d) Cue salience - cues that are easily noticed are most likely to be
used
(e) Overweighting of unreliable cues - reliability of cues is often over-
looked

8. Heuristics and Biases in Hypothesis Generation, Evaluation and Selec-

tion

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 After a limited set of cues is processed in working memory, the deci-
sion maker generates hypotheses by retrieving one or more from long-
term memory.

heuristics and biases that affect this process are:

(a) Limited number of hypotheses generated - people consider only a

small subset of possibilities
(b) Availability heuristic - people make judgments on how easily in-
formation is retrieved (e.g., risk of plane crash)
(c) Representativeness Heuristic - decision based on how closely in-
formation represents typical outcome
(d) Overconfidence - Individuals belief that they are correct more
often than they actually are
(e) Cognitive Tunneling - Identifying a hypotheses and sticking with
it (mind set)
(f) Confirmation Bias tendency to seek out only confirming informa-
tion.

9. Heuristics and Biases in Action Selection

(a) Retrieve a small number of actions - limited by howmany action

plans can be held in working memory
(b) Availability heuristic for actions - easy to retrieve actions are most
often chosen
(c) Availability of possible outcomes - decisions will be made based
on how memorable the outcome of that choice has been in the
past
(d) Framing bias - Decisions affected by the way the situation is pre-
sented.