DECISION MAKING

Decision making is the process of considering alternatives and choosing among them. Making decisions is hard work. Usually people use short cuts in performing decision making. One group of cognitive short-cuts is heuristics. Heuristics are the mental rules of thumb that permit us to make decisions and judgments in a rapid and efficient manner. There are three frequently used heuristics – availability heuristics, representative heuristics, and anchoring and adjustment heuristics. Availability heuristic is a cognitive rule of thumb in which the importance or probability of various events is judged on the basis of how readily they come to mind. Representative heuristic is the mental rule of thumb suggesting that the more closely an event or object resembles typical examples of some concept or category, the more likely it is to belong to that concept or category. Anchoring and adjustment heuristics is a cognitive rule of thumb for making decisions in which existing information is accepted as a reference point but then adjusted in light of various factors.