1. Decision Making Chapter 7

2. Definition of Decision Making Characteristics of decision making: a. Selecting a choice from a number of options b. Some information available with respect to choices c. Time frame is relatively long > 1 sec d. Choice is associated with uncertinty

3. Classical Decision Theory Normative Decision Models – expected value of the outcome (win $50 with P.5). Optimizing choice from all possible. Normative Decision Models – expected value of the outcome (win $50 with P.5). Optimizing choice from all possible. Descriptive Decision Models – most decision makers violate the assumptions of normative decision making (optimum solution). Base decisions on simpler method of looking at a few options and selecting one that is acceptable (satisficing). Shifting to simplifying heuristics. Descriptive Decision Models – most decision makers violate the assumptions of normative decision making (optimum solution). Base decisions on simpler method of looking at a few options and selecting one that is acceptable (satisficing). Shifting to simplifying heuristics.

4. Example Normative Decision Alternative State of Nature/Probability N 1 :Dry Hole N 2 :Sm Well N 3 :Big Well Expected p 1 =.6 p 2 =.3 p3=.1 Value A 1 :Don't Drill$ 0 $ 0$ 0 $ 0 A 2 :Drill Alone -500,000 300,000 9,300,000 720,000 A 3 :Farm Out 0 125,000 1,250,000 162,500

5. Heuristics and Biases

6. Factors & Cognitive Limitations That Effect Decision Making Amount or quality of cue information brought into working memory (WM) Amount or quality of cue information brought into working memory (WM) Available decision making time Available decision making time Attention Resources Attention Resources Amount & quality of person’s LTM knowledge Amount & quality of person’s LTM knowledge Ability to retrieve relevant LTM information Ability to retrieve relevant LTM information WM capacity limitations WM capacity limitations

7. Heuristics Definition – problem-solving by trial and error: a method of solving a problem for which no formula exists, based on informal methods or experience, and employing a form of trial and error iteration

8. Heuristics Biases in Obtaining & Using Cues Attention to a limited number of cues Attention to a limited number of cues Cue primacy – preliminary cues tend to carry more weight than follow-on cues is the primacy effect. Cue primacy – preliminary cues tend to carry more weight than follow-on cues is the primacy effect. Inattention to later cues. Inattention to later cues. Cue salience (noticeable) bias. Cue salience (noticeable) bias. Overweighting of unreliable cues or treating all cues as equal. Overweighting of unreliable cues or treating all cues as equal.

9. Heuristic Biases in Hypothesis Generation A limited number of hypotheses are generated. A limited number of hypotheses are generated. Available heuristic – tendency to rely on recent or frequent heuristic. Available heuristic – tendency to rely on recent or frequent heuristic. Representativeness heuristic – judging an event as likely if it represents the typical features of a category Representativeness heuristic – judging an event as likely if it represents the typical features of a category Overconfidence – believing you are correct more often than you really are Overconfidence – believing you are correct more often than you really are

10. Heuristic Biases in Hypothesis Evaluation & Selection Cognitive fixation – once a hypothesis is generated there is a tendency to ignore subsequent cues. Cognitive fixation – once a hypothesis is generated there is a tendency to ignore subsequent cues. Confirmation bias – seeking out confirming information and not disconfirming information. Confirmation bias – seeking out confirming information and not disconfirming information.

11. Heuristic Biases in Action Selection Retrieval of a small number of actions from LTM. Retrieval of a small number of actions from LTM. Availability heuristic for actions – tendency to retrieve most available actions which is function of frequency and recency. Availability heuristic for actions – tendency to retrieve most available actions which is function of frequency and recency. Availability of possible outcomes – tendency to base decisions on what you think are the best outcome consequences, not what they really are. Availability of possible outcomes – tendency to base decisions on what you think are the best outcome consequences, not what they really are.

12. Naturalistic Decision Making Definition: The way people use their experience to make complex decisions in a field setting. Problems tend to be: –Ill-structured –Uncertain, dynamic environments –Information rich environment where cues change rapidly –Cognitive processing with iterative/feedback loops –Multiple shifting and competing goals –Time constraints or time stress –High risk –Multiple persons involved in the decision

13. Skill, Rule, & Knowledge Based Task Performance

14. More Views of Naturalistic Decision Making Cognitive Continuum Theory – decision process occurs along a continuum from intuition to analysis Cognitive Continuum Theory – decision process occurs along a continuum from intuition to analysis Situation Awareness – perception of elements in environment within a volume of time & space, comprehension of their meaning, & projection of their near future status Situation Awareness – perception of elements in environment within a volume of time & space, comprehension of their meaning, & projection of their near future status Recognition-Primed Decision Making – experts recognize a pattern & recall a single course of action Recognition-Primed Decision Making – experts recognize a pattern & recall a single course of action Schemas, Stories, & Mental Models – analytical processing begins with situation assessment which yields 2 nd level situation awareness where a mental representation is constructed. Representation is called a story or mental model. Schemas, Stories, & Mental Models – analytical processing begins with situation assessment which yields 2 nd level situation awareness where a mental representation is constructed. Representation is called a story or mental model.

15. An Integrated Model of Real-World Decision Making

16. Improving Human Decision Making Redesign situation assessment environment for performance support Redesign situation assessment environment for performance support Training – Help people overcome heuristic biases Training – Help people overcome heuristic biases Decision Aids Decision Aids –Expert Systems – Using computers to capture the knowledge of experts to provide answers to the decision maker –Cognitive Support – Using computers as decision support systems. Any interactive support system that helps the decision maker

17. Problem Solving Problem solving occurs when there is insufficient knowledge to readily make a decision and creative processes are required. Characteristics Characteristics –Person doesn’t have WM capacity –Person doesn’t have enough system knowledge –Person has system knowledge, but it is disconnected & unorganized Errors & biases in problem solving (similar to biases in decision making) Errors & biases in problem solving (similar to biases in decision making) –Poor problem definition –Failure to generate the correct solution plan –Limitations of WM