Decision-making Study Guide

📖 Core Concepts Decision‑making – Cognitive process of picking a belief or action from multiple alternatives. Rational vs. irrational – Rational: logic‑driven, objective, cost‑benefit analysis. Irrational: hasty, ignores outcomes, driven by intuition or emotion. Tacit vs. explicit knowledge – Explicit: articulated, easily communicated. Tacit: personal experience, intuition; both are integrated in real‑world decisions. Perspectives – Psychological (needs & values), Cognitive (continuous interaction with environment), Normative (logical structure of the optimal choice). Problem solving vs. decision‑making – Problem solving generates possible solutions; decision‑making selects the best one. 📌 Must Remember Rational Choice Theory: People choose the option that maximizes personal benefit, weighing all costs & benefits. Subjective Expected Utility (SEU): Choose alternative with highest Σ (pᵢ · Uᵢ), where pᵢ = subjective probability, Uᵢ = utility. Prospect Theory: Risk‑seeking for losses, risk‑averse for gains. Three types of analysis paralysis: Process, precision, risk‑uncertainty. Decision fatigue → poorer choices, impulse decisions, or avoidance. Somatic Marker Hypothesis: Bodily emotional signals tag options as “good” or “bad.” System 1 vs. System 2: Fast/heuristic vs. slow/analytic. 🔄 Key Processes Problem‑solving → Decision‑making workflow Identify & describe problem. Determine cause (apply Occam’s razor). Set objectives & rank importance. Generate alternatives. Evaluate each against all objectives. Choose tentative alternative; test consequences before final action. Expected‑value optimization $$EV = \sum{i=1}^{n} pi \times Ui$$ Compute for each option; pick highest EV (adjust for risk‑aversion if needed). Group decision‑making (Delphi method) Collect expert forecasts anonymously → share summary → repeat until convergence. 🔍 Key Comparisons Rational vs. Irrational decision‑making Rational: logical analysis, objective criteria. Irrational: speed, intuition, often ignores outcomes. Satisficing vs. Maximizing Satisficing: stop when an option is “good enough.” Maximizing: continue searching for the best possible option. Consensus vs. Majority voting Consensus: majority approves, minorities must accept final decision. Majority: >50 % support required; minority may be overruled. System 1 vs. System 2 System 1: automatic, uses heuristics (affect, availability, representativeness). System 2: deliberate, analytical, weighs evidence. ⚠️ Common Misunderstandings “More information = better decisions.” → Information overload creates an “illusion of knowledge” and hampers rational choice. “Decision fatigue only means feeling tired.” → It actually reduces self‑control, leading to impulsive or avoided decisions. “Groupthink is always beneficial.” – It suppresses dissent, leading to poorer outcomes; functional conflict is the productive alternative. “Satisficing is lazy.” – It is a rational strategy under bounded rationality, not a flaw. 🧠 Mental Models / Intuition “Decision funnel” – Start broad (problem solving), progressively narrow through objectives → alternatives → evaluation → final choice. “Cost‑benefit balance sheet” – Visualize pros/cons like a ledger; the side with the larger net value wins. “Emotion‑tagging” – Treat bodily feelings as quick “red/green lights” that guide System 1 before System 2 double‑checks. 🚩 Exceptions & Edge Cases Analysis paralysis vs. decision avoidance: The former is endless deliberation; the latter is outright refusal to decide. Ventromedial prefrontal cortex damage: Impairs advantageous decision‑making despite intact intellect. Framing effects: Same numeric information presented as gains vs. losses can flip the preferred choice (e.g., 90 % survival vs. 10 % mortality). 📍 When to Use Which Use Expected‑Value optimization when probabilities and utilities are quantifiable (e.g., financial choices). Apply Satisficing under time pressure or high information load (bounded rationality). Choose Delphi method for complex, multi‑expert forecasts where anonymity reduces groupthink. Prefer Consensus in high‑stakes teams that need ongoing cooperation; use Majority voting for quick, low‑stakes decisions. Activate System 2 for high‑risk, novel problems; rely on System 1 heuristics for routine, low‑stakes choices. 👀 Patterns to Recognize Repeated “first‑option” selection → may signal premature termination or satisficing bias. Heavy reliance on a single anchor → watch for anchoring‑adjustment bias. Strong emotional language in options → likely triggering somatic markers; pause to verify with analytic reasoning. Group discussions dominated by one voice → risk of groupthink; insert structured turn‑taking or anonymous voting. 🗂️ Exam Traps Distractor: “More information always improves decisions.” – Incorrect; leads to overload. Distractor: “Satisficing is always inferior to maximizing.” – Wrong; satisficing is optimal under bounded rationality. Distractor: “Prospect theory predicts risk‑aversion for both gains and losses.” – Misread; risk‑seeking for losses. Distractor: “Decision fatigue only affects the speed of decision, not quality.” – False; quality deteriorates. Distractor: “Groupthink improves decision quality by ensuring agreement.” – Opposite; functional conflict is the quality‑enhancer.