Understanding how people decide: decision-making theories as mental representations (original) (raw)
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Decision Theory and Rationality (Oxford UP)
2009
Decision Theory and Rationality Abstract The concept of rationality is a common thread through the human and social sciences-from political science to philosophy, from economics to sociology, from management science to decision analysis. But what counts as rational action and rational behavior? This book explores decision theory as a theory of rationality. Decision theory is the mathematical theory of choice and for many social scientists it makes the concept of rationality mathematically tractable and scientifically legitimate. Yet rationality is a concept with several dimensions and the theory of rationality has different roles to play. It plays an action-guiding role (prescribing what counts as a rational solution of a given decision problem). It plays a normative role (giving us the tools to pass judgment not just on how a decision problem was solved, but also on how it was set up in the first place). 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It goes on to explore how, at least ion first appearances, decision theory might be employed in the projects of normative assessment and explanation/prediction. Doing this reveals three basic challenges that decision theory must confront if it is to serve as a theory of rationality. These challenges set the agenda for the main part of the book (Chapters 2 – 4). Chapter 1 keywords Theory of choice Decision-making under risk Decision-making under uncertainty Decision making under certainty Representation theorems Chapter 2 The first challenge: Making sense of utility and preference Abstract This chapter explores how the different dimensions of rationality impose conflicting requirements and constraints upon the central notions of decision theory – the notions of utility and preference. It begins by considering the operational understanding of utility dominant in economics, according to which utility is a measure of preference (as revealed in choice). It goes on to explore different alternatives to the operational understanding. The first alternative is to develop a richer notion of preference (as in Gauthier’s theory of considered preferences). The second alternative is to reject preference as the central notion in decision theory (as in Broome’s analysis of utility in terms of goodness). It turns out that no strategy works for all three of the explanatory projects. Chapter 2 keywords Utility Preference Revealed preference Goodness Chapter 3 The second challenge: Individuating outcomes Abstract Standard presentations of decision theory adopt some version of the invariance principle (that it is irrational to assign different utilities to propositions known to be equivalent). This normative principle raises problems for the idea that decision theory can serve as a theory of motivation. Frederic Schick has responded to this tension by proposing an intensional version of decision theory that allows a single outcome to be understood in different ways (and utilities to be assigned accordingly). This raises problems (such as the failure of the expected utility theorem) that can be dealt with by a more fine-grained way of individuating outcomes (as in Broome’s theory of individuation by justifiers). Again, though, none of these strategies serves all three of the explanatory projects under consideration. Chapter 3 keywords Invariance principle Intensionality Framing effects Substitution axiom (sure-thing principle) Allais paradox Chapter 4 The third challenge: Rationality over time Abstract This chapter explores the challenge of developing decision theory to do justice to the sequential and diachronic nature of decision making. 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psychol.ucl.ac.uk
This chapter reviews normative and descriptive aspects of decision making. Expected Utility Theory (EUT), the dominant normative theory of decision making, is often thought to provide a relatively poor description of how people actually make decisions.
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2016
Decision-making is a central function of management. It is a complex process which requires a highcognitive commitment, because the decision-maker has to assess and choose between different courses ofaction. Moreover, the decision-making is considered a continuous and dynamic process which implies a choiceand is oriented to the achievement of the organizational objectives. In the literature can be found varioustheories and models of decision-making. The higher attention towards the decision-making process is aconsequence of the understanding of its importance in creating sustainable competitive advantages. In adynamic and turbulent environment becomes much more difficult to achieve and maintain a good competitiveposition. The decision-making process is studied by a number of disciplines such as philosophy, mathematics,statistics, psychology, sociology, economics, management, political and social sciences. In the decision-makingtheory we can distinguish two main approaches: the norma...
Judgment and Decision Making: Extrapolations and Applications
Cambridge University Press eBooks, 2001
People who make or implement public policy must often estimate probabilities, predict outcomes, and make decisions that affect the welfare, values, and lives of many others. Until recently many of the disciplines that study policy employed a model of individuals and organizations as rational agents whose predictions conform to the prescriptions of probability theory and whose actions maximize their expected gains in conformity with classical decision theory. Such theories lead a double life. They are sometimes viewed as normative models that tell us what we should do in order to be rational (even if we rarely manage to pull it off). Construed this way, they offer advice: we should have logically consistent beliefs, coherent probability assignments, consistent preferences, and maximize expected utilities. But these same theories have also been viewed as descriptive models; construed this way, they are meant to provide an approximate characterization of the behavior of real people. It is this interpretation that has played a central role in economics, management science, and parts of political science, sociology, and the law. Since the early 1970s this descriptive picture of judgment and decision making has come under increasing attack from scientists working in behavioral decision theory, the field concerned with the ways in which people actually judge, predict, and decide. Much of the criticism derives from the work of Tversky, Kahneman, and others working in the heuristics and biases tradition. Scientists in this tradition argue that people often