Cognitive Biases Are An Influence On An Individuals Method Of Decision Making

Moisand, D. (2000). Effective Financial Planning in the Presence of Judgmental Heuristics. Journal Of Financial Planning, 13(4),

Decision-making is always critical in people’s day-to-day lives. Individuals have to make choices between the very many options they have at their disposal. In doing so, sound judgement is needed, accompanied by much sobriety (Fay, & Montague, 2014). However, in trying to make sound decisions people always base their opinions on certain reference points. In fact, psychologists have generated much data, which shows that people rely so much on the pieces of information that they get to the extent that their judgement is affected. This usually presents the challenge of not making the best decision (Kansal & Sing, 2015).

Hammond, et al., (2013) suggest the effects of being biases could be reduce by using the proper tools, grasping the relevant facts, knowing if the decision maker judgment is intentionally clouded, and disciple your own experience, knowledge and ability to make the right

In decision making there are three heuristics that we utilize, the representativeness heuristic, the availability heuristic and the anchoring and adjustment heuristic (Matlin, 2012). These heuristics act sort of like a mental short cut that helps us quickly make a decision or judgement. Most of the time these heuristics lead us to a sound logical decision, “but we sometimes apply them inappropriately” (Matlin, 2012, p. 408), and this can land us in unpredictable, faulty, and many times undesirable situations.

As a result, individual expectations, experiences, and biases may influence the way that people view probability of financial events or failures. It is possible to understand that human thinking is impacted by the most important things in life for a person. Fear

Heuristics are mental shortcuts we use when making judgments or decisions (Aronson, Wilson, & Akert, 2013). These shortcuts may help in recalling situations or events that may have happened, causing us to store or maintain the cause or event deep into our memories. We often do this unconsciously, or without much effort. When a decision or judgment is made rather quickly, it may be derived from using availability heuristics. This type of heuristics is quickly retrievable from our memory. Our brain relays to us a pile of quick memory joggers we can pick or choose from, in which we feel are relatable to a current situation or event.

An analyst can also reduce their cognitive biases by simply using critical thinking to think through the issue or problem allowing the brain to identify logic, reason and empiricism. Using critical thinking also allows the analyst not to rush into any conclusions or decision that may be wrong or miss leading. Leading to the intelligence to be more precise trustworthy. In since the events of 9/11 could be used as an example of cognitive biases although the threat was there people has a belief that an attack of that magnitude could never happen in America. People only wanted to see what they wanted, end result was that information was potently ignored or

Another explanation for cognitive biases is that essentially, life is hard. We’re faced with increasingly more situations and questions to face, and our brains struggle to make complex choices. Cognitive biases allow the brain to make mental shortcuts, effectively saving time and energy and helping us make the world just a little bit simpler. For confirmation bias, it requires far less mental energy to absorb a piece of information that confirms what we already know, compared to having to absorb an entirely new piece of information that challenges our thoughts and ideas..

Research indicates, emotions and emotional deficits highly impact the individual making the decision and the quality of decision produced (Mustafa & Kingston, 2014). As such, the rational decision-making model provides the most cognitively sound process for the director of risk adjustment. The rational process is the foundation for cultivating and acquiring skills in leadership

Within the decision making domain of cognitive psychology, there are multiple theories that aim to show how the decision-maker chooses the best course of action among many alternatives. The rational choice theory describes that the decision-maker

The proposed hypothesis is based on bounded rationality. The cognitive decision making process allows for individuals to search for and review alternative options and select the alternative that is most beneficial for the situation. Conversely, cognitive dissonance, the condition of having inconsistent thoughts, beliefs or attitudes towards an attitude object (in this case, the attitude object would be the gasoline that you are filling your tank with), limits the alternatives in the decision making process and occurs due to bounded rationality.

Judgmental heuristics is something, as a recruiter, I use everyday. I would define judgmental heuristics as customized operational decisions applied through occupational experiences. Throughout the reading, many consider these decisions to be “rules of thumb”, I would most likely describe these decisions, as applied to my career, as being proactive. As described by, Kendra Cherry a psychology expert, “These rule-of-thumb strategies shorten decision-making time and allow people to function without constantly stopping to think about their next course of action” (Cherry, 2015).

Herbert Simon (1955) argued that humans have limited cognitive resources and use mental rules of thumbs, heuristics, to allow us to produce adequate judgments. Though heuristic approaches are useful and help us make good enough decisions, it allows bias to seep into our judgments. Kahneman and Tversky (1974) identified three heuristics that result in

As I did research I came to realize that there is more to the decision making process. There is also the levels of the decision making and I believe this helps with the

Even though it is hard for people to admit, judges can fall prey to biases. After several studies, researchers use the term cognitive biases to categorize the group of decision errors that can be made by judges. Researchers have found that judges appear to be similar to juries in their inability to disregard legally prejudicial and impermissible facts when deciding on a verdict. Three types of cognitive biases or illusions have been identified as those which trail judges are most vulnerable. These include anchoring, hindsight bias, and egocentric biases. These will all be explained further, including examples.