OAM 330 - DECISION MAKING WITH VERIFIED SOLUTIONS

Limits of Rational Analysis Model - Bounded by uncertainty and ambiguity (RAM requires a lot of info and very often, we don't have it all) - Bounded by imperfections of the mind (Limited by the systematic biases that taint the way we gather, process, and evaluate info.) Anchoring People fixate on an initial anchor and then adjust from it. Estimates in the presence of an anchor are too close to that anchor. Adjustments are often insufficient. Potential Defenses to Anchoring Awareness, Collect several estimates, and re-anchor Confirmation Bias Tendency to seek only confirming evidence while failing to seek disconfirming evidence Biases how people search for, interpret, and remember info. Potential Solutions to Confirmation Bias - Seek disconfirming info - bring in an outsider - Diagnostic rather confirming questions Overconfidence unwarranted faith in our own perceptions and judgments Potential Solutions to Overconfidence -Be aware of it. - Keep objective records. - More info. = better decision -Seek disconfirming evidence availiability bias tendency to base judgements on readily available info. -People use ease of recall as a cue for likelihood -Affected by wildness, primacy or recency Result - Easily recalled cues unduly influence our judgements Loss Aversion losses loom larger than gains -Strongly prefer avoiding losses over acquiring gains escalation of commitment an increased commitment to a previous decision in spite of negative information