Making decisions
Making decisions

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Making decisions

2 Understanding your own approach

2.1 Exercising judgement

To understand how we make decisions, it is useful to start with the ways in which we make judgements about information we are presented with. Let's start this course with an activity designed to get you exercising judgement. The answers are at the end of the questions but please arrive at your own answers before checking them!

The questions in this activity are adapted from Bazerman (1998).

Activity 1

Question 1

  1. In four pages of a novel how many seven-letter words would you expect to find with the form ----ing?

    0, 1–2, 3–4, 5–7, 8–10, 11–15, or 16+

  2. In four pages of a novel how many words would you expect to find with the form -----n-?

    0, 1–2, 3–4, 5–7, 8–10, 11–15, or 16+

Question 2

Which of the following causes more deaths in Western Europe each year?

  1. stomach cancer

  2. motor vehicle accidents

Question 3 Making estimates

For each of the following questions:

  • Make your best guess as to the answer and write it down.

    Do not go and look it up or search online for the right answer – this is about guessing

  • Write down an upper and lower limit that you are 98 per cent certain contains the correct answer.

For example, how far is the earth from the sun?

  • Estimate: 150,000,000 km

  • Upper and lower limit: 200,000,000 km and 100,000,000 km

What was the:

  1. value of Swedish exports in 1992 (£ million)?

  2. value of UK imports from the USA in 1994 (£ million)?

  3. number of people killed by cerebral malaria in India in 1992?

  4. total US health and medical expenditure in 1992 ($ million)?

  5. total land area of the Japanese mainland (sq km)?

Question 4

A rare disease has swept through a town and has affected 600 inhabitants. Experts have suggested two possible programmes for tackling the disease. Look at the two versions of this problem below. What do you notice about Versions 1 and 2? In each version, which option do you think a doctor presented with this information would tend to choose?

Version 1

  • Programme A will save 200 lives (out of 600).

  • Programme B has a one-third probability of saving 600 lives and a two-thirds probability of saving no one.

Version 2

  • Programme A will result in 400 deaths (out of 600).

  • Programme B has a one-third probability of no one dying and a two-thirds probability of 600 deaths.

You will find the answers to this activity below. Once you have checked the answers make a few notes below about what this tells you about your own judgement and decision making.

Answer

Question 1

Your answer for (a) should be less than your answer for (b) because the group of words of the form ‘ -----n-’ includes all of the words of the form ‘--------ing’. However, most people give a higher answer for (1.) than (2.). This is an example of retrievability bias’. Words ending in ‘ing’ are more easily retrieved from our memory so we tend to give more weight to them. This effect extends to organisations. Organisational structures and systems make some kinds of information more easily retrievable than others and hence give more weight to that information in decision making.

Question 2

Stomach cancer causes more deaths than motor accidents by a ratio of more than two to one. Yet most people believe motor accidents cause more deaths. The news media are more likely to carry vivid accounts of motor accidents. Hence, we tend to overweight the incidence of motor accidents. Similarly, in organisational life we are inclined to give more weight to information that is easily available.

Question 3 Making estimates

  1. £56,118 million

  2. £19,697.2 million

  3. 4,000

  4. $71,035 million

  5. 230,448 sq km

How many of the correct answers fell within your upper and lower bounds? The list below sets out the (approximate) odds of answers falling outside your upper and lower bounds if they really were 98 per cent certain.

None outside – 90 per cent

1 outside – 9 per cent

2 outside – 1 chance in 250

3 outside – 1 chance in 2,500

4 outside – 1 chance in 1.3 million

5 outside – 1 chance in 300 million

Typically, most people get more than one wrong; in fact, some people get them all wrong. We tend to be overconfident in our own judgement – even on topics we know nothing about.

Question 4

Versions 1 and 2 are in fact both the same: they are just ‘framed’ differently. Version 1 is framed in terms of lives saved, whereas version 2 is framed in terms of lives lost. However, how the problem is framed does affect decision making, even for medical experts. We tend towards ‘risk aversion’ for problems framed as gains, while we tend to be ‘risk-taking’ to avoid losses where problems are framed in terms of losses. Consequently, most people choose Programme A when presented with version 1 but Programme B when presented with Version 2.

How did you do on these problems? It is likely that they have confronted you with some evidence that you (like many others) are prone to a range of biases in the way you form judgements and make decisions. We will return later in this course to a more detailed examination of the kinds of biases and decision traps we are all prone to.

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