Decision making

Types of Decision Making

• Rational decision making
 A decision making model that describes how individuals should behave in
order to maximize some outcome
• Bounded rationality
 A process of making decisions by constructing simplified models that
extract the essential features from problems without capturing all their
complexity
• Intuitive decision making
 An unconscious process created out of distilled experience
 Common biases and errors in
Decision Making
• Anchoring bias
 A tendency to fixate on initial information, from which one then fails to adequately
adjust for subsequent information
• Confirmation bias
 Seeking information that reaffirms our past choices
• Availability bias
 The tendency for people to base their judgments on information that is readily
available
• Escalation of commitment error
 Staying with a decision even when there is a clear evidence that it is wrong
• Randomness error
 The tendency to believe we can predict the outcomes of uncertain events
• Risk aversion error
 The tendency to prefer a sure thing over a risky outcome
Thank You