Decision-Making Paradigms

Need 200-250 words per part in APA format with scholarly references (Journals)-No Google or Google Scholar books-within the last 4 years to answer the following:Part 1 Hammond, Keeney and Raiffa spoke of unconscious flaws or traps that impair effective decision making. Which of these traps is the most significant contributor to making flawed decisions? Why? Part 2 Douglas proposed an evolutionary decision theory as an alternative to rational decision theory. How might you support heuristic and evolutionary decision theories as an alternative to heuristic and rational decision theory? Supplemental Material Attached–Please do not just summarize the material. Need current refernces to support your position Douglas, K. (2011). Making your mind up. New Scientist, 212(2838). 38-41. Hammond, J. S., Keeney, R. L., & Raiffa, H. (2006). The hidden traps in decision making. Harvard Business Review, 84(1), 118-126. Kahneman, D., Lovallo, D., & Sibony, O. (2011). Before you make that big decision. Harvard Business Review, 89(6), 50-60. Patterson, A., Quinn, L., & Baron, S. (2012). The power of intuitive thinking: a devalued heuristic of strategic marketing. Journal of Strategic Marketing, 20(1), 35-44.
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38 | NewScientist | 12 November 2011
COVER STORY
Difficult choices to make? A heavy dose of irrationality
may be just what you need, says Kate Douglas
Making your
mind up
D
ECISION-MAKING was supposed to
have been cracked by science long ago.
It started in 1654 with an exchange of
letters between two eminent French
mathematicians, Blaise Pascal and Pierre
Fermat. Their insights into games of chance
formed the foundation of probability theory.
And in the 20th century the ideas were
developed into decision theory, an elegant
formulation beloved of economists and social
scientists today. Decision theory sees humans
as “rational optimisers”. Given a choice, we
weigh up each option, considering its value
and probability, and then choose the one with
the “highest expected utility”.
With your experience of making decisions,
you have probably noticed some flaws here.
There’s the risible idea that humans are
rational, and the dubious notion that we
would be capable of the on-the-hoof
calculations of probability, even if we could
access all the necessary information. Decision
theory explains how we would make choices if
we were logical computers or all-knowing
beings. But we’re not. We are just rather clever
apes with a brain shaped by natural selection
to see us through this messy world.
Decision researchers had largely ignored
this inconvenient reality, occasionally
patching up their theory when experiments
revealed exceptions to their rules. But that
make-do-and-mend approach may soon
change. Earlier this year, an independent
institute called the Ernst Strüngmann Forum
assembled a group of big-thinking scientists
in Frankfurt, Germany, to consider whether
we should abandon the old, idealistic decision
theory and start afresh with a new, realistic
one based on evolutionary principles. The
week-long workshop provided a fascinating
exploration of the forces that actually shape
our decisions: innate biases, emotions,
expectations, misconceptions, conformity
and other all-too-human factors. While our
decision-making may seem inconsistent or
occasionally downright perverse, the truly
intriguing thing is just how often these
seemingly irrational forces help us make the
right choice.
We must start by acknowledging that many
of our choices are not consciously calculated.
Each day we may face between 2500 and
10,000 decisions, ranging from minor
concerns about what brand of coffee to drink
to the question of who we should marry,
and many of these are made in the uncharted
depths of the subconscious mind. Indeed,
Ap Dijksterhuis at the Radboud University
Nijmegen in the Netherlands and colleagues
have found that our subconscious thinking is
particularly astute when we are faced with
difficult choices such as which house to buy
or deciding between two cars with many
different features (Science, vol 311, p 1005).
What drives these gut feelings? Being
>
MENTAL GLITCHES THAT
MAKE fools of US
The human brain does not
compute options like a rational
computer, yet our decisions are
often effective. Nevertheless,
some of our mental biases are
hard to explain.
In novel situations, or ones
where information is limited,
we have the unfortunate habit
of basing decisions on random
connections. This so-called
anchoring effect was first
shown by Daniel Kahneman of
Princeton University and the
late Amos Tversky, and the
consequences can be
bemusing. One study found
that people asked to write a
high number subsequently bid
more for items whose value
was unknown than people who
wrote down a low number.
Kahneman and Tversky also
revealed our peculiar attitudes
to risk. We tend to be more
cautious than is logical when
there is the possibility of
making large gains or small
losses. However, we choose
unduly risky options when
there is the chance of making
a small gain or a large loss. In
recent years, our inclination to
undervalue rare but
catastrophic events has been
dubbed the Black Swan effect.
Another factor underpinning
some bad decisions is the
confirmation bias – our
tendency to overemphasise
anything that confirms what
we already believe. Then there’s
loss aversion: it feels worse to
lose something than to gain the
equivalent amount, making us
protect what we have rather
than take a chance to make a
gain. Also, when choosing
whether to continue with a
venture we irrationally consider
the investment we have already
made in it – the sunk-cost
fallacy. Meanwhile, our
short-term bias – temporal
discounting – means we tend to
prefer smaller rewards now to
bigger ones later.
12 November 2011 | NewScientist | 39
inaccessible to conscious examination, the
processes are particularly difficult to fathom.
One idea is that they are based on heuristics –
mental rules of thumb which, applied in
appropriate situations, allow us to make fast
decisions with minimal cognitive effort. The
“recognition heuristic”, for example, will
direct you to choose a familiar option where
there is very little information to go on. The
“satisficing heuristic”, meanwhile, tells you
to pick the first option that meets or exceeds
your expectations, when delaying a choice for
too long is not in your interests.
Evolution’s satnav
Heuristics are shaped by previously successful
choices – either hard-wired by evolution or
learned through trial and error – so it’s no
wonder they tend to work. Peter Todd from
Indiana University, Bloomington, has shown,
for example, that satisficing is a sound basis
for choosing a romantic partner (New Scientist,
4 September 1999, p 32). The recognition
heuristic, meanwhile, may underpin some of
your better guesses in multiple choice quizzes.
However, some critics doubt whether our
subconscious choices really are based on
heuristics; they argue that this approach to
decision-making would be neither fast nor
cognitively simple since we would need a
complex mental mechanism to select the
” Even the most basic
everyday situations are
too complex for our brains
to compute all the
necessary information.
Instead, we must simplify”
correct heuristic to use.
Our emotions may instead be the driving
force in subconscious decision-making. We
now know that far from being the antithesis of
rationality, emotions are actually evolution’s
satnav, directing us towards choices that have
survival benefits. Anger can motivate us to
punish a transgressor, for instance, which
might help us to maintain social order and
group cohesion. So says Peter Hammerstein
from Humboldt University of Berlin,
Germany, who helped organise the workshop.
Disgust, meanwhile, makes us fastidious and
moralistic, which should prompt choices that
help us avoid disease and shun people who
don’t play by the rules. And while fear often
seems to lead to overreactions, this makes
sense when you consider the dangers facing
prehistoric humans, says Daniel Nettle from
Newcastle University, UK. On that one
occasion where a rustle in the bushes really
was made by a predator, the less neurotic
peers of our ancestors would have paid the
ultimate price, failing to pass their laid-back
genes on to the next generation (Personality
and Social Psychology Review, vol 10, p 47).
Heuristics and emotions help us
subconsciously focus on what matters. This
is just as important when we make conscious
decisions. Even the most basic everyday
situations are too complex for our brains to
compute all the necessary information.
Instead, we must simplify.
Gordon Brown at the University of Warwick,
UK, argues that we rank alternatives based on
cognitively easy, binary comparisons. For
example, when deciding whether £2.20 is too
much to pay for a cup of coffee, you might
recall half a dozen occasions when you paid
less and only two when you paid more,
leading you to place this particular coffee in
the “expensive” category, and choose not to
buy it. This so-called “decision by sampling”
approach simplifies the options, but it can
also lead to bad decisions when the limited
information used to rank alternatives is
incorrect or based on false beliefs (Cognitive
Psychology, vol 53, p 1). If, for instance,
frequent nights out with boozy friends
leads you to conclude that your alcohol
consumption is in the top 20 per cent of
drinkers, when in fact it falls in the top 1 per
THE LOGIC OF INCONSISTENCY
If you prefer apples to plums,
and plums to pears, then
given the choice between
apples and pears you will
obviously pick apples. Or will
you? In reality, people fail to
show such logical behaviour.
This kind of inconsistency,
known as intransitivity, has
been a headache for
mathematicians trying to
understand decision-making.
But their mistake may have
been to think of the human
brain as a computer rather
than a biological entity that
must solve the problem of
how to compare apples, pears
and plums.
Admittedly, our
understanding of what goes
on in a brain when it makes
a choice is very hazy, as
became apparent at an Ernst
Strüngmann Forum on
decision-making in Frankfurt
earlier this year. It is generally
agreed that there must be a
mental “common currency”
for comparing options. What
this is, or how it converts into
apples, pears, or whatever,
is a mystery. However, Nick
Chater from the University
of Warwick, UK, argues that
because the brain lacks time
and computing power, it
evaluates only a limited
number of attributes for each
alternative. This process
could explain intransitivity,
according to cognitive
40 | NewScientist | 12 November 2011
psychologist Danny
Oppenheimer of Princeton
University.
He believes the brain uses
a kind of voting system:
different brain areas weigh
up the various attributes of
apples, pears and plums, say,
and compete with each other
to have their preference
chosen. If there’s no clear
winner, you might decide on
any of the fruit, depending
on which region happens to
gain the upper hand at that
moment (see diagram, right).
Intransitivity could be a
by-product of the way our
brains work, rather than a
trait we have evolved for its
own advantage.
When asked to choose between APPLES, PEARS
and PLUMS, your brain may use a kind of voting
system to decide. Different parts of the brain will
rank the different attributes. If there is no clear
winner, your preference will depend on the region
that dominates at the time
1st
choice
Brain region 1
(SWAYED BY
FLAVOUR)
Brain region 2
(SWAYED BY
SHAPE)
Brain region 3
(SWAYED BY
COLOUR)
2nd
choice
3rd
choice
cent, you are more likely to decide to ignore
the problem. Decision by sampling could
even sway your choice when you face more
immediate threats: people living in a society
with high mortality rates are more likely to
decide to put themselves at risk than someone
who has had little experience of danger.
That’s not very heartening, but Alex
Kacelnik at the University of Oxford takes a
more optimistic view of our ability to pick
and choose the information upon which we
base our decisions. “Natural selection allows
us to correct our behaviour to do what works,”
he says. Kacelnik believes the main force
influencing decision-making is reinforcement
learning. In other words, we learn from
experience and favour what has worked in
the past. Nothing controversial there. But,
he notes, we are also swayed by our changing
internal states – things like hunger, thirst and
libido – so that choices are tailored to our
needs. Decision theory has long struggled with
the problem that people are inconsistent (see
“The logic of inconsistency”, left), but Kacelnik
argues that apparent inconsistencies in choice
can arise simply because our preferences
change according to our needs. “Utility is a
moving target,” he says. We may not show the
“economic rationality” of traditional decision
theory but our choices have their own logic,
which he calls “biological rationality”.
Natural selection can even explain our
puzzling propensity to eschew choice
altogether and simply follow the herd. Rob
Boyd from the University of California, Los
Angeles, pointed out at the workshop that we
have evolved to learn from others because this
is often a wise option. “In most situations it is
way beyond an individual’s capacity to know
the best thing to do,” he says. But we are good
at recognising who to copy, says Laura Schulz
of Massachusetts Institute of Technology
who has found that even young children
assess the expertise of their “teachers”. As a
result, our conformist tendencies often lead
to surprisingly good choices (New Scientist,
1 May 2010, p 40). They allow us to fit in when
we start a new school or job and make wise
purchases of the latest products without full
information on the alternatives. The flip side
is that we can also all fall into line with the
immoral or illegal behaviour of those around
us or be swayed by manipulative leaders.
Consideration of others is yet another
aspect of human behaviour that flies in
the face of decision theory. There are many
situations in which a rational optimiser
should not cooperate, since such actions
” We give to charity
because of the warm
glow of altruism –
evolution’s reward for
team players”
can use up precious resources that we could
use to better our own circumstances. From an
evolutionary standpoint, it could be argued
that some forms of apparent altruism help us
to build alliances and improve our standing
on the social ladder, but what about the times
we overdo cooperation? An anonymous
donation to charity, for example, will not
boost your reputation or persuade others
to help you in your hour of need. In purely
evolutionary terms, it is a bad choice. But we
do it anyway because the warm glow of
altruism, which is evolution’s reward to team
players, makes us feel good. In effect, we are
tricked by a mental glitch. And it is not the
only such glitch we possess. Researchers in
decision theory have uncovered a variety of
mental biases underlying some of our more
illogical and arbitrary behaviours (see “Mental
glitches that make fools of us”, page 39).
So what’s going on? Have our brains evolved
to direct our behaviour in ways that have
become maladaptive in the modern world?
That should become clear as more decision
researchers consider how we actually make
up our minds, rather than how we should.
Accepting that we are not rational optimisers
will make life difficult for economists and
anyone searching for a formula for choice,
which is why some members of the Frankfurt
group were reluctant to abandon decision
theory altogether. But a better understanding
of the forces that underpin our decisions
should help everyone make better choices.
Conformists, for example, might be
persuaded to adopt environmentally
sustainable habits simply because others
already have. Governments wanting us to
save up for retirement need to understand
why we are so bad at making long-term
decisions. And we could all be more aware of
the misconceptions and biases shaping our
behaviour. The discovery of “decision fatigue”,
for instance, which makes judges four times
more likely to grant bail in the morning than
in the afternoon, might persuade you to take
more time out when facing a string of tough
problems (Proceedings of the National
Academy of Sciences, DOI: 10.1073/
pnas.1018033108). And understanding that
the behaviours of your nearest and dearest
can bias your view of your own lifestyle might
remind you to dig into the facts before you
choose to follow or reject a new health regime.
Of all the choices that you face everyday, the
decision to try to make better decisions is
surely the biggest no-brainer. n
Kate Douglas is an editor at New Scientist
12 November 2011 | NewScientist | 41
Journal of Strategic Marketing
Vol. 20, No. 1, February 2012, 35–44
The power of intuitive thinking: a devalued heuristic of strategic
marketing
Anthony Patterson*, Lee Quinn and Steve Baron
The Management School, University of Liverpool, Liverpool, UK
(Received 30 May 2011; final version received 27 September 2011)
Historically, the value of intuition in strategic marketing has been devalued.
Consequently, the aim of this paper is to investigate empirically and articulate the ways
in which the heuristic of intuition can prove, and is proving, helpful to marketing
managers involved in making strategic-level decisions. Drawing upon extensive
interviews conducted with marketing managers, we explore the extent to which
intuitive insights are privileged over systematic, rational, logical evaluations. Our data
evidence how intuition-led decision making becomes a powerful tool in instances
where there is a paucity of data, when options are manifold, when the future is
uncertain and when the logic of strategic choice needs to be confirmed. Ultimately, the
paper seeks to place a new and affirmative subjectivity within the realm of marketing
strategy that respects and legitimises the power of intuitive insight.
Keywords: heuristics; intuition; strategic planning
Introduction
To the detriment of the value placed on the intuition, judgement and subjective insight of
marketing managers, the strategic marketing literature has long been guilty of giving
undue prominence to analytical processes and approaches that rely heavily on market
research data to drive strategy creation. So guilty, in fact, that many textbooks in this area
seem to be prefaced with get-off-the-hook clauses that attempt to account, and even
apologise, for this all too obvious omission in their work. By way of illustration, consider
this quotation from Meldrum and McDonald (2007, p. 251) who state, ‘no matter how
important intuition, feel and experience are as contributory factors in this process of
rationality . . . ’. In other words, to be so bold as to articulate what they really mean, ‘no
matter how important these things may be, please, dear readers, just abide by the
predetermined models and frameworks in our book’. Such privileging of pure rationality
and reason is, of course, a mainstay of contemporary marketing theory and thought. In spite
of the espousal of alternative modes of intuitive decision making, which gained
prominence in the late 1990s (Day, 1997; Dolnick, 1998; Weintraub, 1998), continuing to
gather pace in more recent times (Dane & Pratt, 2007; Duggan, 2007), the rational
perspective has managed to remain very firmly rooted. Indeed, Boyett and Boyett (2003,
p. 158), with tongue firmly in cheek, perfectly summarise the general attitude in strategic
marketing thinking: ‘intuition-based testosterone-driven marketing decision making is
always bad and logic, analysis, and rationality is always the way to go’. Even Kotler and
*Corresponding author. Email: a.patterson@liverpool.ac.uk
ISSN 0965-254X print/ISSN 1466-4488 online
q 2012 Taylor & Francis
http://dx.doi.org/10.1080/0965254X.2011.628407
http://www.tandfonline.com
36
A. Patterson et al.
Keller (2006, p. 724) long for the day that marks ‘the demise of marketing intuition and the
rise of marketing science’.
Despite receiving significant scholarly attention, both theoretically and conceptually,
few studies have examined the prevalence and nature of intuition in practice (Henden,
2004). This is particularly noticeable in the marketing strategy literature despite the
increasing attention that has been drawn to the reality of marketing managerial activity,
with researchers frequently raising the issue of subjectively influenced managerial
decision-making practices within their empirical inquiries (e.g. Alvesson, 1998; Ardley,
2008; Hackley, 2000; Quinn, 2009; Quinn, Hines, & Bennison, 2007). The notion and
nature of intuitive decision making, in particular, has drawn significant attention within the
organisational psychology literature and has been variously articulated as a managerial
means of moving beyond the reliance on rational, numerical and complex flows of data to
make quicker, or post-hoc rationalised, judgements based on what research participants
have explained as ‘gut feel …
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