ILROBSeptember17 - i. Tendency to use stereotypes if people...

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ILROB September 17, 2007 I. Decision Making: Process of making choices from among several choices II. Rational Economic Model a. Consider all possible options before selecting optimal solution b. Optimal = greatest well being c. Limitations i. Bounded Rationality: people don’t have cognitive resources to evaluate all possible options before making choice ii. Satisfying decision often made: People select first minimally acceptable alternative as it becomes available III. How do people actually make decisions? a. Heuristics: simple decision rules to make quick decisions about complex problems i. Helpful when processing large amounts of information ii. “Rules of Thumb” = from experience iii. Often lead to systematic errors b. Availability Heuristics i. Make choice from information that we know and is available ii. Whatever is fresh in our memory drives our choices c. Representativeness Heuristics
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Unformatted text preview: i. Tendency to use stereotypes if people are typical for stereotype ii. Ignore base rate information iii. Consequences: 1. Entrepreneurs are more likely to imagine success than the potential for failure even though most businesses fail 2. Most people refuse to sign pre-nup even though divorce rate is mad high 3. Vietnam War: Biases made ppl make bad choice, but they still sent more ppl a. Escalation of Commitment i. Self-Justification ii. Less likely to escalate when responsibility can be diffused b. They should have changed courses but they did not IV. Choice Overload a. Normally better choices are made when there are more choices available b. However, too many alternatives leads to negative consequences i. Will be dissatisfied with choice if there are too many options ii. Less is better...
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This note was uploaded on 02/20/2008 for the course ILROB 1220 taught by Professor Goncaloj during the Fall '07 term at Cornell.

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