Bounded rationality is the idea that in decision making, rationality of individuals is limited by the information they have, the cognitive limitations of their minds, and the finite amount of time they have to make decisions. It was proposed by Herbert Simon as an alternative basis for the mathematical modeling of decision making, as used
A Pyrrhic victory is a victory with devastating cost to the victor; it carries the implication that another such victory will ultimately cause defeat. Origin The phrase is named after King Pyrrhus of Epirus, whose army suffered irreplaceable casualties in defeating the Romans at Heraclea in 280 BC and Asculum in 279 BC during
Confirmation bias (also called confirmatory bias or myside bias) is a tendency for people to favor information that confirms their preconceptions or hypotheses regardless of whether the information is true.[Note 1] As a result, people gather evidence and recall information from memory selectively, and interpret it in a biased way. The biases appear in particular
A simple AHP hierarchy, with final priorities. The goal is to select the most suitable leader from a field of three candidates. The factors to be considered are Experience, Education, Charisma, and Age. According to the judgments of the decision makers, Dick is the strongest candidate, followed by Tom, then Harry. Their decision process is
Business Decision Mapping (BDM) is a technique for making decisions, particularly for the kind of decisions that often need to be made in business. It involves using diagrams to help articulate and work through the decision problem, from initial recognition of the need through to communication of the decision and the thinking behind it. BDM
Choice architecture describes the way in which decisions are influenced by how the choices are presented (in order to influence the outcome), and is a term used by Cass Sunstein and economist Richard Thaler in the 2008 book Nudge: Improving Decisions about Health, Wealth, and Happiness. Parallels are drawn between choice architecture and traditional architecture.
Choice modelling attempts to model the decision process of an individual or segment in a particular context. Choice modelling may also be used to estimate non-market environmental benefits and costs. Choice Models are able to predict with great accuracy how individuals would react in a particular situation. Unlike a poll or a survey, predictions are
Decision downloading refers to communicating a decision to those who have not been involved in the decision-making process. The term “decision downloading” is used to set apart those special situations in which decision-makers communicate a decision that has already been made. The communicators cannot, for whatever reason, keep everyone informed in real-time about the decision-making
Decision Engineering is a framework that unifies a number of best practices for organizational decision making. It is based on the recognition that, in many organizations, decision making could be improved if a more structured approach were used. Decision engineering seeks to overcome a decision making “complexity ceiling”, which is characterized by a mismatch between
Recent research suggests that emotions are just as influential as cognitive processes when it comes to decision making. This is interesting because emotions are often considered irrational occurrences that may distort reasoning (Barnes and Thagard, 1996). According to Sayegh, et al. (2004), the conventional way of thinking about decision making is to banish emotion from
Lock-in can be seen as the escalating commitment of decision-makers to an ineffective course of action. It concerns institutional lock-in as compared to technical lock-in of which the QWERTY keyboard is a famous example. The decision-making process is characterised by various informal and formal decision-making moments and decision-makers can become committed to the project before
Majority rule is a decision rule that selects alternatives which have a majority, that is, more than half the votes. It is the binary decision rule used most often in influential decision-making bodies, including the legislatures of democratic nations. Some scholars have recommended against the use of majority rule, at least under certain circumstances, due
A concept first named by Richard Thaler (1980), mental accounting attempts to describe the process whereby people code, categorize and evaluate economic outcomes. One detailed application of mental accounting, the behavioral life cycle hypothesis (Shefrin & Thaler, 1988), posits that people mentally frame assets as belonging to either current income, current wealth or future income
In decision theory and general systems theory, a mindset is a set of assumptions, methods or notations held by one or more people or groups of people which is so established that it creates a powerful incentive within these people or groups to continue to adopt or accept prior behaviors, choices, or tools. This phenomenon
Decentralized decision making is any process where the decision making authority is distributed throughout a larger group. It also connotes a higher authority given to lower level functionaries, executives, and workers. This can be in any organization of any size, from a governmental authority to a corporation. However, the context in which the term is
Online deliberation is a term associated with an emerging body of practice, research, and software dedicated to fostering serious, purposive discussion over the Internet. It overlaps with, but is not identical to, e-democracy. Online deliberation is very interdisciplinary, and includes practices such as online consultation, e-participation, online deliberative polling, online facilitation, online research communities, interactive
Participative Decision-Making (PDM) is the extent to which employers allow or encourage employees to share or participate in organizational decision-making (Probst, 2005). According to Cotton et al. (1988), the format of PDM could be formal or informal. In addition, the degree of participation could range from zero to 100% in different PM stages (Cotton et
Path dependence explains how the set of decisions one faces for any given circumstance is limited by the decisions one has made in the past, even though past circumstances may no longer be relevant. In economics and the social sciences path dependence can refer to either outcomes at a single moment in time or to
This article describes the role rank reversals play in assessing the merits of decision making methods. The issue of rank reversals lies at the heart of many debates in decision making and multi-criteria decision making, in particular. Unlike most other computational procedures, it is hard to tell if a particular decision making method has derived
Robust decision making is an iterative decision analytic framework that helps identify potential robust strategies, characterize the vulnerabilities of such strategies, and evaluate the tradeoffs among them. RDM focuses on informing decisions under conditions of what is called ‘deep uncertainty,’ that is, conditions where the parties to a decision do not know or do not
Heuristic refers to experience-based techniques for problem solving, learning, and discovery. Heuristic methods are used to speed up the process of finding a good enough solution, where an exhaustive search is impractical. Examples of this method include using a “rule of thumb”, an educated guess, an intuitive judgment, or common sense. In more precise terms
The availability heuristic is a phenomenon (which can result in a cognitive bias) in which people predict the frequency of an event, or a proportion within a population, based on how easily an example can be brought to mind. This phenomenon was first reported by psychologists Amos Tversky and Daniel Kahneman, who also identified the
The representativeness heuristic is a psychological term wherein people judge the probability or frequency of a hypothesis by considering how much the hypothesis resembles available data as opposed to using a Bayesian calculation. While often very useful in everyday life, it can also result in neglect of relevant base rates and other cognitive biases. The
Naïve diversification is a choice heuristic (also known as “diversification heuristic”). Its first demonstration was made by Itamar Simonson in marketing in the context of consumption decisions by individuals. It was subsequently shown in the context of economic and financial decisions. Simonson showed that when people have to make simultaneous choice (e.g. choose now which