COMPONENTS OF RISKY DECISION MAKING
If all of your friends jumped off a bridge, would you jump too? That is quite a risky decision to make, but when you analyze your options before rushing to make your choice, the correct decision may surprise you.
You’ve got to weigh a few things: your own choice and decision making behaviors, the algebraic theories of outcomes, and cognitive computational theories. After looking at these routes of decision making, you should also look at your limitations: ‘what utilities or means are available to me? What’s the worst outcome possible, and am I able to handle that? Is anyone else going to be hurt by my choice? Will I be held accountable?’ An article by Reid Hastie titled: Problems for Judgment and Decision Making, analyzes the psychology behind making risky decisions.
For example, Hastie argues that a person’s desires, goals, and values, as well as his or her knowledge, means, and expectations are taken into account when making an uncertain decision. This can be illustrated in his diagram seen below:
The most influential part of risky decision making is the conclusion. Hastie divides this into two categories: outcomes, which are the public and well known, and consequences which are the public evaluation of your decision. Hastie states that we use the conclusions of our decision making to help our future judgment. “Decision making refers to the entire process of choosing a course of action. Judgment refers to the components of the larger decision-making process that are concerned with assessing, estimating, and inferring what events will occur and what the decision-maker’s evaluative reactions to those outcomes will be.” (p. 657).
In order to be more efficient and accurate when making uncertain decisions, Hastie argues that we must better evaluate our values and emotional beliefs in order to de-cloud the process and gain accurate information.
Text Credit: Hastie, R., Problems for Judgment and Decision Making, Annual Review of Psychology, Vol 52, p. 653-659, 2001.
Photo Credit: http://www.flickr.com/photos/peteretep/161884037/