Cognitive Bias
There are various models in decision making that exists in the business world and other things today. The rational model is believed to be the ideal. In actuality, the people who makes the decisions, usually face uncertainties and they also have less or incomplete knowledge. For the response of the boundaries of the balanced model, Simon in the year 1979 incepted the idea of bounded rationality that exists in decision making (Ehrlinger, 2016). Similarly, in the book “Models of Man” by Simon, he has mentioned some more biases like cognitive bias and ecological rationality etc. As per Jennings and Wattan in the year 1994, the heuristics concept in decision making is developed in the school of cognitive psychology in which the human beings were looked upon as the processors who process information. Heuristics are the readymade frameworks to which the individuals apply when they process the information. This report discusses about three concepts of decision making bias. The concepts are cognitive bias, ecological rationality and bounded or procedural rationality. A critical examination of these concepts is done with some real-world applications of these concepts.
Cognitive bias is considered to be the orderly inconsistency in between the right answer in a task that is judgmental and is given by normative rule and the decision makers (Campitelli, 2010). When the decisions which are time critical and are required to be made in the dynamic environment, the person who needs to make the decision actually changes the cognitive processing methods (Turpin, 2004). In broader terms, Maule found that pressure of time actually shifts the processing of cognition of the decision maker from the exterior information sources towards the interior information sources. Due to this sifting, the process of decision making can be affected because the internal sources do not mostly have any opinion and they are neutral than most of the external information sources. The pressure of time can also rise up the reliance of the decision maker on the vital features of the apt knowledge at the same time reducing the attention given to the information which is less important (Fendley, 2009). Cognitive heuristics are the rules of thumb that are employed at the time of decision making. They can lead to the biases which lower the quality of the decisions to be taken. The work done on the cognitive biases by Huey and Wickens in the year 1993 displays the way the heuristics and biases effects the decision making process via bending the hypothesis formulation and awareness of situation. Both of them also concluded that this bending which is able to lower the decision making, could also happen all throughout the cognitive task of information processing (Montibeller & Winterfeldt, 2015).
Information Processing Model
The information given by Huey and Wickens models is displayed above in the report. The work of both these researchers finds that there are three stages of the processing of the information. That is perception, processing and responding (Murata, 2015). They suggested that cognitive functioning is the iterative procedure where every decision which is made always adds up to the information for the long term memory repository. The information in the working memory is considered only basing upon the knowledge in the long term memory. While the schemes are stored, it makes it easier for identifying the object which is familiar. Over the time, these schemes goes to the development of the heuristics strategies that are meant for improving the efficiency and the reality of the information decision making operation. Though, these strategies could also take the process toward downfall because there are biases present with the heuristics.
The processing of the information is vital for understanding because of the huge applicability of it in multiple cognitive tasks. The extension of the link between the identification of the object in the information processing process signals perception processing.
Ecological rationality concept displays that there are three beliefs in terms of decision making. First is that the strategies of mind’s decision making are adjusted to the certain environments. Hence, the strategies of decision making are not just good or bad but they can be examined with relation to the environments in which they are being used (Salway & Wakefield, 2005). The term environment is referred to as the statistical properties of the object sets like correlations in between the quality of these objects (Mata, Pachur, & Schooler, 2012). Secondly, in some particular environments, very simple decision making strategies are capable of completing with the critical strategies. Thirdly, human beings at large only answers adaptively to the tasks and environmental elements.
Gigerenzer in the year 1996 founded the speedy and sensible approach for decision making. He critiqued the heuristics approach of Tversky and Kahneman in three features. Firstly, the usage of probability, statistics and logic as values of rationality; Secondly, in the lack of vitality of the environment and thirdly, in the under pattern of the heuristics (Wakefield, 2008). Example: He argues that the heuristics remains indistinct, not defined and not specified in terms of both the antecedent conditions that elicits them and also to the process of cognition which underlines them. He also suggested that norms given by Tversky and Kahneman to examin their logic which was too thin (Berg, 2014).
Ecological Rationality
The approach of Gigerenzer towards the decision making process was systematic and it was addressed towards the 3 criticisms of the biased rationality schedule. Rather than using the probability, statistics and logic of rationality, he used the parameter for rationality to define as to how the cognitive process benefits the person in adapting to the environment (Howes, et al., 2009). Example: He asked for the participants from the cities that have large population and then he advised that the use of this task also addresses the problem of the environment. A cultured prediction of certain features of the environment founded on unfinished info is what symbolizes the human rationality. Human beings are adapted to their environment only if they are able to perform these types of educated guesses (Todd & Fiddick, 2000).
Simon with his work continuously pushed to building a theory of human behavior. This is honest in terms of his incursions in the field of economics. He produced the theory of economic behavior. His emphasize was majorly on the economic agent than the economy. However, this agent does not necessarily equate to person (Hortal, 2017). Rationality is placed in the middle in this behavioral theory. It is actually considered to be the major explaining element though it is not the only one. He had this belief that people are not irrational all the time but they display bounded rationality. For example: This world is too complicated in order to be understood completely and hence, people forms the simplest model and behave likely in assertion to that model. They behave by suing the heuristics as type of mental shortcuts (Walker, 2015). According to him, people use that strategy of satisficing. People do not take account of all the options they have and they also do not calculate about those options to know which one would be the most beneficial for them and which one would be the smallest loss. People will always consider the options one after the other and choose the first one which satisfies them. In other words, they would choose the options which meet the last and the lowermost level of acceptability. Therefore, they believe the lesser number of choices while growing their decisions (Barros, 2010).
The minds which are bounded can never be successful by using the structures in the environment. In the words of Simon, a huge lesson could be learnt around logical decision making by knowing about the facts of the environment and by adapting to the properties which allows further simplification of mechanisms. The bounded rationality is neither the optimization and nor the optimization under irrationality. According to Gigerenzer and Selten, bounded rationality is all about step by step rules which operate nicely under the constraints of very small search, information and time irrespective of the optimal process is available (Mousavi, 2017). The heuristics of the rules were named as adaptive toolbox according to them. This toolbox was
- A collection of the rules and decision making algorithm.
- Heuristics which are speedy, simple and cheap instead of consistent, coherent and usual.
- Heuristics that is adapted to the certain environments where ecological rationality allows certain mentioned elements of heuristics.
- The bunch of heuristics in the toolbox is coordinated by some badly understood mechanisms reflecting the vitality of the differing motivations and aims.
Bounded Rationality
In the month of March 1977, a flight 747 KLM 4805 started the journey from Amsterdam and its destination was Las Palmas Airport on Canary Islands. An explosion of explosive happened at the flower shop in Las Palmas Airport & hence the flight with few other flights was abstracted to the Tenerife Airport. After the flight landed at airport, it waited for the permission from air traffic controller for making it to fly. As there was low perceptibility due to the mist at the airport, the permission was also delayed a lot. The captain then became certain for taking off without taking any permission from the ATC. He twisted the throttles in full control and speed on the runway that was foggy. It was very unfortunate that the flight Pan Am 747 was parked just crossways where KLM 4805 was approaching to take off with full speed. The captain tried his level best to avoid the collision yet both the flights burst into each other and the passengers in both flights lost their lives as both the flights burnt into flamed by explosion. Brafman pointing out that this loss aversion added to the flight KLM 4805 crash.
In the case, the loss if lives for the captain comprise a lowest time because of the wait in flight, price of lodging the travelers at the guesthouse till scenario is resolved, consequences series of the delay in flight like stress on the captain and spot on the reputation of the captain about being prompt. The interaction of such elements was complicated and possibly triggered the emotions of the captain of feeling of loss aversion. The more the vitality of the potential loss is, the more a person tend to be loss aversive. The captain might have been occupied with thinking of reaching on time to the destination and should have lost his mind and his intellect for safety. Hence, that resulted in the choice he took of taking off without the permission of the airport traffic control. Because of not applying the decision logically, people tend to get trapped in the cognitive biases like this example. This experience of loss aversion unintentionally was moved by the decision making talents of the captain & hence, produced the crash.
Frederick in the year 2005 examined the type of responding which can be considered as the ability to react impulsively. It was usually found in younger adults according to the research. The cognitive reflection test is one of the measuring tools of cognitive bias which assertively measures the cognitive ability and capability to make the person decide. The reflection of cognition within the adults is not studied but the impulsive tendencies may be expected to reduce as the age increases as the self monitoring depends on the abilities of cognition. In the case of flight too, the captain became impulsive. In this case, the measurement of the cognitive bias can also be done by the cognitive bias tool so that the level of impulsion is known (Finucane, 2010).
There is one case by Robinson given in the year 1950. This was the relation between the nativity and literacy. For the 48 states in United States of America in 1930, Robinson computed two numbers: The percentage of population which is foreign born and the percentage who were educated. He then found a relation in between all 48 pairs of numbers. That correlation related to ecology suggested an assertive link within foreign birth and literacy: The people who were foreign born are more literate as compared to the native born. In actuality, the link the link was pessimistic: the link measured at the personal level; was -0.11. The ecological correlation in the end gave the improper inference (Pai, 2001). This was because of the foreign-born people as they tended to settle in states where people who are natively born are educated. In this case, the correlation was completely reversed. The ecological bias arises from understanding that relations which were observed for groups unavoidably holds for the individuals: if provinces with more Protestants incline to have advanced suicide rates, then Protestants should be more likely to commit suicide. Such implications made using group-level statistics might not always be right at the individual level (Friedman, 2017).
In this case given by Robinson, one essences on the consequences of well specified features of structure of environment on the functioning of decision making mechanisms. For appreciating the two forms of the structure of environment, one has to have a detailed knowledge about the complete case. The ecological fallacy can be measured in the above case by just having the complete details of the foreign people who came to USA and the people who were natively from USA and well educated (Sleboda, 2017).
The best example of the bounded rationality is the people at the college reports about the undertaking of high disappointments rate in the course of math. The group for the decision was dived on the basis of the addressing required for the issue. For gaining more clarity on the sensitiveness of the issue, the group on the whole created the question for which prognostic analytics can give some visions. The data which was displayed there was the great achievement rate if the time amid conclusion of the course & the registration in next course was restricted for 2 years. There was higher advantage if time would have been decreased to one year. One of the respondent also said that though he was in the starting against it, this department of math was manipulated but he info and he started to grow the new policy. The data is accountable for swaying people’s opinions on this. Additional decision group details an alike procedure to inspect the linking between education modalities and scholar absorbing. People in delayed groups of decisions reported utilizing the research proof to higher the particular program. The interpretations are reliable with masterpieces in management theory that suggest data is frequently not used for instrumental reasons connected to solving a comparatively straight-forward technical issue. Rather, info can be used governmentally for affirming commanding way and control for the pre-determined solution.
The bounded rationality comes into picture when people choose less options as compared to the more options they have. At the same time their mind is bounded and they cannot foresee things in a larger gap. The above example shows that the failure was happening in the course of math and it can be reduced if the course time was cut short for two years. The bounded rationality occurred when the criteria of the time period came into picture. It was the fallacy because when people choose the subjects, their interests are in their mind first. They fail may be because of not working hard or because of being diverted. No one can fail math because they are studying it for a long time and they get bored of it. Hence, the fallacy can be measured by knowing or measuring about the minds and the opinions of the people about the course of math (Aczel & Bago, 2015).
To overcome the biases, here are some points which can be beneficial. They are:
- Hunt persistently for possibly applicable disconfirming signal
- Admit the “Chief Contrarian” as fragment of team
- Obtain varied outside view for countering one’s boldness
- Reward the procedure and abstain from punishing faults when meanings and struggles are rigorous
- Evade the possible for growth or further emotional speculation in damaged decisions provoked by hasty “public” commitment(Wolf, 2012).
In all the above cases or scenarios, the biases and their outcomes could have been improved by first of all, overcoming the biases with the help of the points mentioned above under the overcoming the bias heading. As every bias is related to different outcomes, there should be the applicability of the basic possible measures to overcome the biases.
This report has two parts. The first part is the essay about the critical examination of the concepts if decision making in relation to the biases mentioned by Simon in his book “Models of Man”. These decision-making biases which are discussed are related to the humans and their decisions which they take in their daily lives. There are three concepts which this report talks about. They are Cognitive bias, Ecological Rationality and Bounded Rationality. In the second part of the report, the real world application of all the three concepts are discussed with the measuring methods, overcoming the biases ways and taking out better outcomes from the case studies are discussed.
References
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Campitelli, G. (2010). Herbert Simon’s Decision-Making Approach: Investigation of Cognitive Processes in Experts. eview of General Psychology, 14(4).
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Murata, A. (2015). Influence of Cognitive Biases in Distorting Decision Making and Leading to Critical Unfavorable Incidents. Safety , 1, 44-58.
Pai, M. (2001). The B Files: Case Studies of Bias in Real Life. International Journal of Epidimeology, 30.
Salway, R., & Wakefield, J. (2005). Sources of bias in ecological studies of non-rare events. Environmental and Ecological Statistics, 12, 321-347.
Sleboda, P. (2017). Measurements of Rationality: Individual Differences in Information Processing, the Transitivity of Preferences and Decision Strategies. Frontiers in Psychology, 8(1844).
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Wakefield, J. (2008). Overcoming Ecologic Bias using the Two-Phase Study Design. American Journal of Epidemiology, 167(8), 08–916.
Walker, A. J. (2015). Procedural rationality as a means for evidence-based management in conflicted decision-making: a mixed-methods study. Retrieved October 12, 2018, from https://etd.ohiolink.edu/!etd.send_file?accession=case1427835243&disposition=inline
Wolf, R. F. (2012). How to Minimize Your Biases When Making Decisions. Retrieved October 12, 2018, from https://hbr.org/2012/09/how-to-minimize-your-biases-when
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