PERCEPTIONS AND

INDIVIDUAL DECISION MAKING

CH. 6

HAJRA ASAD
PERCEPTIONS Factors that Influence Perceptions

Perceive
r
• A process by which
individuals organize and
interpret their sensory
impressions in order to give
meaning to their
environment Perception
s

• Are perceptions important?

Situatio Targe
n t
ATTRIBUTION THEORY
• An attempt to determine whether an individual’s behaviour is internally or externally caused

• This determination depends on three factors:

• Distinctiveness
– Whether the displayed behaviour was unusual
• Consensus
– Everyone who faces a similar situation responds in the same way
• Consistency
– The more consistent the behaviour the more inclined we are to attribute it to internal causes
ATTRIBUTION THEORY
• Fundamental Attribution Error
– When we make judgements about the
behaviour of other people, we
underestimate the influence of external
factors and we overestimate the
influence of internal factors

• Self Serving Bias

– We attribute our own success to internal
factors such as our ability or effort
COMMON SHORTCUTS IN JUDGING OTHERS
• Selective Perception
– We focus on certain stimuli while ignoring other stimuli that doesn’t stand out
– We block stimuli that contradicts our values and beliefs

• Halo Effect
– Allowing a single characteristic to influence overall impression of the person we are judging
• Contrast Effect
– An unconscious bias that occurs when two things are judged in comparison to one another
• Stereotyping
– When we judge someone on the basis of our perception of the group to which he/she belongs

• Self-fulfilling Prophecy
– We believe something about others, we may act in ways that encourage them to confirm our assumptions
– When we believe something about ourselves, we may act in ways that correspond to our beliefs
RATIONAL DECISION MAKING MODEL

Assumptions of the model:

The decision make has complete information

The decision maker is able to identify all the relevant options in an unbiased manner

He/she chooses the option with the highest utility

Identify the Allocate Select the

Define the Develop Evaluate
decision weights to best
problem alternative alternatives
criteria the criteria alternative
BOUNDED RATIONALITY
• Limited information-processing capability
• There may be a great number of unknowns
• Not every complex problem has an optimal solution
• Rather than making an endless search for the optimal solution, a practical decision maker looks
for a satisfactory course of action to resolve the problem
• Seeking “good enough” solutions- the satisficing choice rather than the optimal one
• Intuitive decision making
COMMON BIASES AND ERRORS IN
DECISION MAKING
• Overconfidence Bias
– As we become more knowledgeable about an issue, we are less likely to display overconfidence
• Anchoring Bias
– Depending too heavily on the initial information that we receive in decision making
• Confirmation Bias
– We seek out information that reaffirms our views
• Availability Bias
– Basing judgements to information readily available
• Escalation of Commitment
– Sticking to a decision even when there is clear evidence that it’s the wrong decision
COMMON BIASES AND ERRORS IN
DECISION MAKING
• Randomness Error
– Tendency to believe we can predict the outcome of random events

• Risk Aversion
– Tendency to stick with the established course of action rather than the risky one
– Minimizes risk but may lead to stagnation

• Hindsight Bias
– Tendency to believe after learning an outcome that one would have forseen it
ETHICS IN DECISION MAKING
• Utilitarianism
– Decisions based solely on the outcome
– Dominant method for organizations
– Promotes efficiency and productivity

• Rights
– Decisions based on the fundamental rights and privileges of the people
– Respecting and protecting basic rights of individuals such as whistle blowers
– Protects individuals from harm

• Justice
– Implementing rules fairly and impartially
– Equitable distribution of benefits and costs
– Protects the interests of the weaker members
IMPROVING CREATIVITY IN DECISION
MAKING
• Creativity: Ability to produce
novel and useful ideas
• Three Component Model of
Creativity
• Individual creativity results Expertise
Intrinsic
Creative Task Motivation
Thinking Skills
from a mixture of three
components