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Decision Making Decision Making: Dr. Manahan Siallagan

This document provides an overview of decision making and cognitive biases that can influence decisions. It discusses descriptive decision making, which examines what people actually do, and prescriptive decision making, which examines what people should do. The rational model of decision making assumes people will perfectly define problems, identify all criteria, accurately weigh criteria, know all alternatives, accurately assess alternatives, and choose the optimal solution. However, actual decision making has bounded rationality and is influenced by biases. Cognitive biases are patterns of deviation from rational judgment that can lead to inaccurate or irrational decisions. They arise due to the interaction between intuitive System 1 and reflective System 2 thinking. Understanding cognitive biases can help improve decisions and make them closer to optimal.

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heda kalenia
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25 views

Decision Making Decision Making: Dr. Manahan Siallagan

This document provides an overview of decision making and cognitive biases that can influence decisions. It discusses descriptive decision making, which examines what people actually do, and prescriptive decision making, which examines what people should do. The rational model of decision making assumes people will perfectly define problems, identify all criteria, accurately weigh criteria, know all alternatives, accurately assess alternatives, and choose the optimal solution. However, actual decision making has bounded rationality and is influenced by biases. Cognitive biases are patterns of deviation from rational judgment that can lead to inaccurate or irrational decisions. They arise due to the interaction between intuitive System 1 and reflective System 2 thinking. Understanding cognitive biases can help improve decisions and make them closer to optimal.

Uploaded by

heda kalenia
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 23

DECISION

MAKING

Dr. Manahan
Siallagan
Lets Warming Up
Prepare your pen
Follow the
instruction
Have Fun!!
1. Guess The Result !

a. 13 + 13 = ?

b. 200 25 = ?

c.17 x 24 = ?
2. Guess The Result !

8x6x2x7x4x1x3x5
3. Which one is longer ?
4. What do you think the answer
is ?

If it takes 5 machines 5 minutes to


make 5 widgets, how long would it
take 100 machines to make 100
widgets ?

100 minutes OR 5 minutes


5. Which one is true?

(a)
Adolf Hitler was born in 1892

(b)
Adolf Hitler was born in 1887
6. What do you think the answer
is ?

A bat and ball cost $1.10


The bat costs one dollar more than the ball

How much does the ball cost?


9
7. Complete the Missing Part!

S__P
8. What do you think the answer is?

In a lake, there is a patch of lily pads.


Everyday, the patch doubles in size

If it takes 48 days for the patch to cover the


entire lake, how long would it take for the patch
to cover half of the lake ?

24 days 47 days
9. Which colour is lighter ?
10. Finally

How confident are you with all the


answer?

______%
14
Therefore, in the Decision Making what
we will learn is how to improve the not
optimal solution so our decision will be
closer to gain an optimal solution

15
Decision Making

Descriptive
What people actually do, or
have done
Prescriptive
What people should and can do
Normative
What people should do (in theory)

16
Decision
Rational/Ideal/Normat
ive
Approaches Actual/Descriptive
Decision Making Decision Making
Assumptions: GAP
1. Perfectly define the
problem Bounded
2. Identify all criteria Rational
3. Accurately weigh all
criteria according to
their preference
Prescriptive
4. Know all relevant
Intuition
alternatives
5. Accurately asses Systematic Model
each alternative of Decision
based on each Process
criterion Biases
6. Accurately calculate
and choose the
alternative with the Guidances to be
highest perceived more rational
value
Not
Optimal Need to
Close to optimal
solution Improve
solution
17
What is Cognitive Bias ?
Pattern of deviation in judgment (Haselton,
Nettle & Andrews, 2005)

Cognitive biases sometimes lead to perceptual


distortion, inaccurate judgment, illogical
interpretation, or mostly known as irrationality
(Kahneman, 1972; Ariely, 2008)

See : Cognitive Bias Definitions.mp4


What Cause Cognitive Bias ?
Because
System 1 System 2
(intuitive, automatic) (Reflective, effortful)
Cannot be turn off Cannot be main actor

Process Characteristics
Automatic Controlled
Effortless Effortful
Associative Deductive
Rapid, parallel Slow, serial
Process opaque Self-aware
Skilled action Rule application

20
Therefore, in the Decision Making what
we will learn is how to improve the not
optimal solution

so our decision will be closer to gain an


optimal solution

How to be closer to gain an optimal


solution?

21
Rational Decision Making
Then, based
on the
expected
The rational outcomes
decision and their
making weights,
process you rate
relies your
mostly on options by
logic and their
quantitative perceived
analysis. utility.

You consciously Finally, you


analyze all the choose the
options. You option that
formulate the main has the
criteria for judging highest
the expected rating.
outcomes of your
options and you
assign certain
weights to those
criteria to reflect
THANKS

23

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