Chapter 6 Perception and Individual Decision Making What is Perception Perception is a process by which individuals organize and interpret their sensory impressions in order to give meaning to their environment People s behavior is based on their perception on what reality is not on Perception can be shaped by the perceiver the object the target or in the reality itself context of the situation Your interpretation is influenced by your personal characteristics your attitudes personality motives ect The relationship of a target to its background also influences perception as does our tendency to group close things and similar things together The location light heat ect can affect your interpretation Person Perception Making Judgments About Others Person perception the perceptions people form about each other Attribution theory tries to explain the ways in which we judge people differently depending on the meaning we attribute to a given behavior when we observe one s behavior we attempt to determine whether it was internally or externally caused that determination depends on distinctiveness consensus and consistency Internally caused are those we believe to be under the personal control of the individual being late to work bc you overslept Externally caused the situation forced the individual to do being late to work bc there was an accident Distinctiveness refers to whether an individual displays different behaviors in different situations high external low internal Consensus when everyone who faces a similar situation responds in the same way high external low internal Consistency high internal low external Tend to blame failure on external factors and own successes to internal factors Fundamental attribution error when we make judgments about the behavior of other people we tend to underestimate the influence of external factors and overestimate the influence of internal personal factors Self serving bias people tend to attribute ambiguous information as relatively flattering and accept positive feedback while rejecting negative feedback Selective perception the tendency to selectively interpret what one sees on the basis of one s interests background experience and attitudes Halo effect the tendency to draw a general impression about an individual on the basis of a single characteristic Contrast effect evaluation of a person s characteristics that is affected by comparisons with other people recently encountered who rank higher or lower on the same characteristics Stereotyping judging someone of the basis of one s perception of the group to which that person belongs Self fulfilling prophecy a situation in which a person inaccurately perceives a second person and the resulting expectations cause the second person to behave in ways consistent with the original perception The Link Between Perception and Individual Decision Making Decisions choices made from among two or more alternatives Problem a discrepancy between the current state of affairs and some desired state awareness of a problem and that a decision may or may not be needed in a perceptional issue Deciding what data is relevant developing alternatives evaluating their strengths and weaknesses depend on our perceptions Decision Making in Organizations Rational decision making model a decision making model that describes how individuals should behavior in order to maximize some outcome o Define the problem o Identify the decision criteria o Allocate weights to the criteria o Develop the alternatives o Evaluate the alternatives o Select the best alternative Bounded rationality a process of making decisions by constructing simplified models that extract the essential features from problems without capturing all their complexity Intuitive decision making an unconscious process created out of distilled experience supplement intuition with evidence and good judgment People tend to rely too much on experience impulses gut feelings and convenient rules of thumb in order to minimize effort and avoid difficult decisions Overconfidence bias when given factual questions and asked to judge the probability that our answers are correct we tend to be far too optimistic To reduce biases and errors focus on goals look for info that disconfirms your beliefs don t try to create meaning out of random events increase your options Anchoring bias a tendency to fixate on initial information from which one then fails to adequately adjust for subsequent information happens whenever a negotiation takes place Confirmation bias the tendency to seek out info that reaffirms past choices and to discount info that contradicts past judgments Availability bias the tendency for people to base their judgments on information that is readily available to them Escalation of commitment an increased commitment to a previous decision in spite of negative information do not want to admit you made a mistake so you stick by your initial now proven wrong decision Randomness error the tendency of individuals to believe that they can predict the outcome of random events Risk aversion the tendency to prefer a sure gain of a moderate amount over a riskier outcome even if the riskier outcome might have a higher expected payoff Hindsight bias the tendency to believe falsely after an outcome of an event is actually know that one would have accurately predicted that outcome The overconfidence of both lenders and borrowers about the ability to pay back loans was a major factor in the financial crisis Confirmation bias investors deliberately avoid negative information about investments Influences on Decision Making Individual Differences and Organizational Constraints Personality does influence our decisions o People with high self esteem are strongly motivated to maintain it so they use the self serving bias to preserve it they blame others for the failures and take credit for the successes o Conscientiousness achievement striving and dutifulness Achievement oriented people escalate their commitment more and appear more susceptible to hindsight bias Gender differences women tend to overthink problems more ruminate more Mental ability can help people avoid some errors intelligent people can learn to avoid decision making errors Cultural differences Organizational constraints o Performance evaluation o Reward systems suggests which choices have better personal payoffs o Formal regulations o System imposed time constraints o Historical precedents What About Ethics in Decision
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