Psychological Predispositions in Choice Making.

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Intellectual Biases in Decision Making. William Siefert, M.S. . AcknowledgementsWork in light of the examination done by Dr Amos Tversky, PhDDr Daniel Kahneman, PhD
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Cognitive Biases in Decision Making William Siefert, M.S.

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Acknowledgments Work taking into account the exploration done by Dr Amos Tversky, PhD Dr Daniel Kahneman, PhD "Prospect Theory" Nobel Prize, 2002 Dr Eric Smith, PhD Dr Paul Slovic, PhD

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"Trepidation of damage should be relative not simply to the gravity of the mischief, but rather likewise to the likelihood of the occasion." Logic, or the Art of Thinking Antoine Arnould, 1662

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5 x 5 Risk "Solid shape" Objective versus Subjective information Original Current

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Present Situation Risk grids are perceived by industry as the most ideal approach to: reliably evaluate dangers, as a major aspect of a repeatable and quantifiable danger administration process Risk lattices include human: Numerical judgment Calibration – area, degree Rounding, Censoring Data upgrading regularly drew closer with under certainty frequently doubted by chiefs

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Goal More exact and repeatable Systems Engineering Decisions Confidence in right appraisal of likelihood and quality Avoidance of particular errors Recommended activities

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Heuristics and Biases Daniel Kahneman won the Nobel Prize in Economics in 2002 "for having coordinated bits of knowledge from mental exploration into monetary science, particularly concerning human judgment and basic leadership under instability." Similarities between intellectual predisposition tests and the danger network tomahawks demonstrate that danger frameworks are helpless to human inclinations.

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Anchoring First impression rules all further thought 1-100 wheel of fortune spun Number of African countries in the United Nations? Little number, similar to 12, the subjects disparaged Large number, as 92, the subjects overestimated Obviating master feeling The investigator holds a roundabout conviction that master conclusion or audit is a bit much on the grounds that no confirmation for the need of master sentiment is available.

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Heuristics and Biases Presence of psychological predispositions – even in broad and confirmed examinations – can never be discounted . Intrinsic human predispositions, and outside conditions, for example, the encircling or setting of an inquiry, can trade off assessments, judgments and choices. Note that subjects frequently keep up a solid sense that they are acting reasonably while displaying inclinations.

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Likelihood Frequency of event is objective, discrete Probability is consistent, fiction "Humans judge probabilities poorly" [Cosmides and Tooby, 1996] Likelihood is a subjective judgment (unless scientific) "Presentation" by task administrator ageless

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Case Study Industry hazard framework information 1412 unique and current danger focuses Time of first section known Time of last redesign known Cost, Schedule and Technical known Subject matter not known Biases uncovered Likelihood and result judgment

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Magnitude versus Dependability [Griffin and Tversky, 1992] Magnitude saw more legitimate Data with extraordinary extents yet poor unwavering quality are prone to be picked and utilized Observation: hazard networks are size driven, without respect to unwavering quality

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1. Estimation in a Pre-Define Scale Bias Scale greatness impacts judgment [Schwarz, 1990] Two inquiries, arbitrary half of subjects: Please gauge the normal number of hours you sit in front of the TV every week: ____ __ X _ ____ 1-4 5-8 9-12 13-16 17-20 More Please gauge the normal number of hours you sit in front of the TV every week: ____ __ X _ ____ 1-2 3-4 5-6 7-8 9-10 More

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Severity Amplifiers Lack of control Lack of decision Lack of trust Lack of caution Lack of comprehension Manmade Newness Dreadfulness Personalization Recallability Imminency

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Situation appraisal 5 x 5 Risk Matrices try to expand hazard estimation consistency Hypothesis: Cognitive Bias data can enhance the legitimacy and affectability of danger grid examination and different Systems Engineering investigation

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Prospect Theory Decision-production depicted with subjective appraisal of: Probabilities Values and blends in bets Prospect Theory breaks subjective basic leadership into: preparatory "screening" stage, probabilities and qualities are subjectively surveyed optional "assessment" stage joins the subjective probabilities and utilities

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Humans judge probabilities inadequately * Small probabilities overestimated Large probabilities under evaluated

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Gains and misfortunes are not equivalent *

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Subjective Utility Values considered from reference point built up by the subject\'s riches and viewpoint Framing Gains and misfortunes are subjectively esteemed 1-to-2 proportion.

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Implication of Prospect Theory for the Risk Matrix

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ANALYSES AND OBSERVATIONS OF INITIAL DATA Impediments for the presence of psychological inclinations in the business information: Industry information are granular while the forecasts of Prospect Theory are for consistent information Qualitative depictions of 5 scopes of probability and outcome non-direct impact in the arrangement of danger datum focuses Nevertheless, the proof of subjective predispositions rises up out of the information

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3. Likelihood Centering Bias Likelihoods are pushed toward L = 3 Symmetric to a first request

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Guess Why the Spike in New Risks

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Cognitive Biases in real life Engineers: Schedule outcomes impact vocations Technical results impact work execution audits Cost outcomes are remote and connected with administration Higher comprehension of Biases will be important at the building level

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CONCLUSION First time that the impacts of intellectual predispositions have been reported inside the danger framework Clear proof that likelihood and worth interpretations, as probability and result judgments, are available in industry hazard network information Steps 1) the interpretations were anticipated by prospect hypothesis, 2) recorded information affirmed forecasts Risk lattices are not target number matrices Subjective, yet helpful, intends to check that danger things have gotten hazard relieving consideration.

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Suggestions for Cognitive Biases change Long-term, institutional objectivity Team approach Iterations Public survey Expert audit Biases and blunders mindfulness Requires social changes

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References L. Cosmides, and J. Tooby, Are people great instinctive analysts all things considered? Reexamining a few conclusions from the writing on judgment under vulnerability, Cognition 58 (1996), 1-73. D. Kahneman, and A. Tversky, Prospect hypothesis: An examination of choice under danger, Econometrica 46(2) (1979), 171-185. Nobel, "The Bank of Sweden Prize in Economic Sciences in memory of Alfred Nobel 2002," 2002. Recovered March, 2006 from Nobel Foundation: aspects/laureates/2002/index.html . N. Schwarz, Assessing recurrence reports of everyday practices: Contributions of subjective brain research to questionaire development, Review of Personality and Social Psychology 11 (1990), 98-119. A. Tversky, and D. Kahneman, Advances in prospect hypothesis: Cumulative representation of instability, Journal of Risk and Uncertainty 5 (1992), 297-323.

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