The Hidden Traps in Decision Making
Abstract
Bad decisions can often be traced back to the way the decisions were made--the alternatives were not clearly defined, the right information was not collected, the costs and benefits were not accurately weighed. But sometimes the fault lies not in the decision-making process but rather in the mind of the decision maker. The way the human brain works can sabotage the choices we make. Eight psychological traps that are particularly likely to affect the way we make business decisions are examined. The anchoring trap leads us to give disproportionate weight to the first information we receive. The status-quo trap biases us toward maintaining the current situation--even when better alternatives exist. The sunk-cost trap inclines us to perpetuate the mistakes of the past. The confirming-evidence trap leads us to seek out information supporting an existing predilection and to discount opposing information. The framing trap occurs when we misstate a problem, undermining the entire decision-making process. The overconfidence trap makes us over-estimate the accuracy of our forecasts. The prudence trap leads us to be overcautious when we make estimates about uncertain events. And the recallability trap leads us to give undue weight to recent, dramatic events. The best way to avoid all the traps is awareness--forewarned is forearmed. The authors show how to take action to ensure that important business decisions are sound and reliable.
... Essa é uma reação já abordada no estudo das representações sociais: o indivíduo médio é "[...] impermeável à informação, limita-se a confirmar suas teorias ao invés de falsificar teorias, e explica tudo aquilo que observa com base em causas pessoais" (Moscovici, 1986, p. 50, tradução nossa). Esse é também um viés longamente conhecido e estudado em teoria da decisão (Hammond;Keeney;Raiffa, 1998;Tversky;Kahneman, 1974). A diferença para a Teoria das Representações Sociais (TRS) é a perspectiva mais ampla que ela traz, pelo seu caráter marcadamente social. ...
... Essa é uma reação já abordada no estudo das representações sociais: o indivíduo médio é "[...] impermeável à informação, limita-se a confirmar suas teorias ao invés de falsificar teorias, e explica tudo aquilo que observa com base em causas pessoais" (Moscovici, 1986, p. 50, tradução nossa). Esse é também um viés longamente conhecido e estudado em teoria da decisão (Hammond;Keeney;Raiffa, 1998;Tversky;Kahneman, 1974). A diferença para a Teoria das Representações Sociais (TRS) é a perspectiva mais ampla que ela traz, pelo seu caráter marcadamente social. ...
... Essa é uma reação já abordada no estudo das representações sociais: o indivíduo médio é "[...] impermeável à informação, limita-se a confirmar suas teorias ao invés de falsificar teorias, e explica tudo aquilo que observa com base em causas pessoais" (Moscovici, 1986, p. 50, tradução nossa). Esse é também um viés longamente conhecido e estudado em teoria da decisão (Hammond;Keeney;Raiffa, 1998;Tversky;Kahneman, 1974). A diferença para a Teoria das Representações Sociais (TRS) é a perspectiva mais ampla que ela traz, pelo seu caráter marcadamente social. ...
O artigo discute a representação social da ciência por professores do Ensino Médio de uma instituição de ensino da cidade do Rio de Janeiro. O grupo estudado contou com 33 professores das áreas de Física, Química e Biologia. Eles responderam ao TACB-S (Teste de Alfabetização Científica Básica – Simplificado) e participaram de entrevistas semiestruturadas. A análise do TABC-R foi feita com o software excel©. As entrevistas foram submetidas a uma análise textual utilizando o software IRaMuTeQ. Os resultados indicam uma construção da representação social da ciência organizada em torno de uma tensão entre elementos internos e externos da ciência. Essa tensão opõe uma visão da ciência associada à construção do conhecimento científico e uma visão interna, associada às disciplinas escolares e à prática docente.
... Herd behaviour refers to individuals being influenced by the behaviour of others, often driven by motivations such as reducing uncertainty or risk, whereas the anchoring effect refers to individuals focusing on a reference point in their decision-making processes (Wilkinson & Klaes, 2018). First impressions, predictions, evaluations made by others, or even a report in the daily newspaper can serve as anchors that affect individuals' subsequent thoughts and judgments (Hammond et al., 1998). In this context, this study problematizes how herding behaviour and anchoring affect source credibility. ...
... First impressions or predictions serve as anchors for subsequent thoughts and judgments. Anchors can come in different forms; an evaluation by an expert or even a news article in a daily newspaper can be given as examples of anchors (Hammond et al., 1998). The anchoring effect is one of the basic heuristics that people frequently use in the decision-making process (Tversky & Kahneman, 1974). ...
The objective of this paper is to explore the effects of herding and anchoring effects, two behavioural economics concepts, on perceived source credibility, which is commonly utilized in marketing research. These cognitive shortcuts that shape consumers' decisions reduce their perceived risk or help them make decisions under uncertainty. The literature contains a limited amount of research on the topic that addresses source credibility in terms of behavioural economics. Within this framework, the study is anticipated to enhance the body of literature through its chosen topic and methodology. When reviewing research undertaken within the marketing domain, the experimental design method has been used in very few studies. In this context, in the experimental designs created within the scope of the study, various scenarios were designed on the basis of follower number (high/low) to evaluate the impact of herd behaviour on the credibility of the source and on the substance of news about the influencer (positive/negative) to measure the anchoring effect. After the participants were shown one of the scenarios, they were given questionnaires with statements about source credibility to answer, and how the perception of source credibility differs according to herd behaviour and the anchoring effect was investigated. Instagram influencers were used in the experimental designs created in the study because Instagram application is increasingly preferred over other social media platforms, is more effective in terms of marketing communication, is increasingly included in the marketing strategies of businesses and is preferred by the young population. Within the framework of this research, data were gathered via an online survey administered to a total of 727 students enrolled in various departments across universities in Turkey. These data were subjected to one-way ANOVA via the SPSS program. Research findings indicate that herding behaviour significantly affects the perceptions of the source credibility, expertise, and attractiveness of social media influencers. Furthermore, anchoring significantly affects the source credibility perceptions and expertise, trustworthiness, and attractiveness subdimensions. However, in scenarios where the number of followers and anchors are identical, a statistically significant difference was not found in the perception of source credibility in relation to the gender of the influencer.
... Despite the prevalence of these biases, individuals often fail to recognize them in their own decision-making (Pronin, 2007). Additionally, decisionmakers can fall into psychological traps such as the anchoring trap and the status quo trap (Hammond et al., 1998). ...
The interest in understanding the human aspects of avalanche risk mitigation has steadily grown over the past few decades. Between 2001–2011, 11 research papers on decision-making in avalanche terrain were published in peer- reviewed journals. Between 2012–2022, this number rose to 55. These papers have been authored by researchers from various disciplines and publications in journals across different fields. Despite the field's nascent stage, to guide future research, it is pertinent to provide an overview of the insights from the existing research literature.
This paper offers a systematic overview of peer-reviewed research on human factors in avalanche decision-making. The overview is based on a systematic literature search covering research published up until the end of 2022. The search was conducted across six databases, including Scopus and Web of Science, using a set of keywords related to avalanche decision-making (e.g., “decision-making,” “backcountry skiing,” “avalanche terrain,” “avalanche accident”). Out of nearly 13 000 articles containing at least one of the key search terms, 70 had a research question related to avalanche decision-making and were published in peer-reviewed academic journals. Additionally, 81 relevant papers were published as ISSW (International Snow Science Workshop) proceedings.
We coded all the identified papers based on major and minor research questions, control variables, population covered, and methodology. Twelve concepts described the different research themes (e.g., avalanche accidents, avalanche education, decision-making strategies). Due to a large variation in quality regarding the ISSW papers, we only applied these concepts to the 70 peer-reviewed papers and present them by their main concept. The extracted data from all papers including the ISSW papers can be found at https://osf.io/u9ydm/ (last access: 12 February 2025).
... Best practices from other industries include the establishment of clear risk ownership, with designated senior managers responsible for specific risks and a dedicated senior-level committee for risk-focused decision-making (Committee of Sponsoring Organizations of the Treadway Commission, 2017). Senior management should have clear go/no-go decision protocols and rules to follow in their decision-making (Eisenhardt, 1989;Hammond et al., 1998). Finally, since AI risk evolves rapidly, there should also be a clear escalation process for rapid decision-making when there are changes in risk levels(Committee of Sponsoring Organizations of the Treadway Commission, 2017). ...
The recent development of powerful AI systems has highlighted the need for robust risk management frameworks in the AI industry. Although companies have begun to implement safety frameworks, current approaches often lack the systematic rigor found in other high-risk industries. This paper presents a comprehensive risk management framework for the development of frontier AI that bridges this gap by integrating established risk management principles with emerging AI-specific practices. The framework consists of four key components: (1) risk identification (through literature review, open-ended red-teaming, and risk modeling), (2) risk analysis and evaluation using quantitative metrics and clearly defined thresholds, (3) risk treatment through mitigation measures such as containment, deployment controls, and assurance processes, and (4) risk governance establishing clear organizational structures and accountability. Drawing from best practices in mature industries such as aviation or nuclear power, while accounting for AI's unique challenges, this framework provides AI developers with actionable guidelines for implementing robust risk management. The paper details how each component should be implemented throughout the life-cycle of the AI system - from planning through deployment - and emphasizes the importance and feasibility of conducting risk management work prior to the final training run to minimize the burden associated with it.
... However, every individual -and by extension, each organisation -makes decisions with limited information and cognitive resources (Simon, 1955). Decisions are influenced by and made through various factors such as emotions, cognitive biases, traps, and heuristics (Bechara et al., 1997;Hammond et al., 1998;Tversky & Kahneman, 1974). Lastly, the complexity of the decisions can be defined by task analysability, variability (Hackman & Oldham, 1976), replicability, and coupling with technology (Perrow, 1967). ...
Research item added in February 2025 -
This study explores the transformative potential of artificial intelligence (AI) in digital B2C marketplaces, focusing on how AI-powered platforms streamline complex transactions and decision-making processes. Through experiments with digital assistants, language models, and hybrid applications, the research evaluates the readiness of AI tools to automate end-to-end transactions on a 5-level scale. Findings reveal that while digital assistants remain limited to basic tasks, advanced language models like ChatGPT and Bing show promise in enhancing decision-making and automating intermediate steps. This research proposes a novel Decision-Making Engine (DME) framework, based on reinforcement learning algorithms such as Deep Q-Networks, to further automate and optimize transactions. The implications extend to retail, industrial applications, and smart cities, showcasing AI's potential to reduce time and decision friction, enhance user experiences, and unlock value in digital platforms.
Suggested citation: Valeri, A. (2023). AI-Powered Platforms: Automated Transactions in Digital Marketplaces. Conference Proceedings of the 2nd Conference in Business Research and Management, 247–260. Aracne Editrice. ISBN: 9791221808780. https://doi.org/10.0.207.144/979122180878030
... Paul (2014Paul ( , 2015 on 'transformative decisions' highlights choices that fundamentally change the decision-maker's life in unpredictable ways. These decisions are characterized by novelty, high uncertainty (Hogarth et al., 2015;Paul, 2014), and often irreversible outcomes (Fischhoff, 2015;Taleb, 2007;Hammond et al., 1998). They commit the decision-maker to a particular path with lasting implications (Gilbert and Ebert, 2002). ...
This article examines how three types of experience—personal, related others, and unrelated others—influence decision-making. We present the complexities and nuances in using these experiential sources to suggest that personal experience is preferred to the other two sources. We discuss the implications of this preference for decision-making processes, especially in contexts involving transformative outcomes. To conclude, we discuss how people rely on other experiential sources when their preferred source is limited.
... Our study, inspired by the urgent need to turn good intentions into actual actions for a greener planet [2], investigates how digital nudging can be strategically applied to influence sustainable snack choices among adolescents, a demographic that significantly shapes future market trends [5]. We focus on the socio-technical dynamics of decision-making, where technical interventions (nudging techniques) interact with the social context (adolescent consumers) to shape behavior [6]. ...
This study explores the socio-technical dynamics of digital nudging techniques in promoting environmentally friendly snack choices among teenagers. Using a Choice-Based Conjoint Analysis approach, we designed a survey incorporating various snack attributes, including nutritional content, packaging, flavor, and traffic light nudges. Four distinct survey variants were created: one without traffic lights, one with a complete set of three traffic lights (red, yellow, green), and two featuring only red or green traffic lights. The study involved over 400 adolescent girls aged 14 and 15 presented with different snack scenarios and asked to select their preferred options. Sensitivity analysis was applied to evaluate the reliability of the survey responses. Our findings revealed complex interactions between digital nudges and adolescent decision-making, with unexpected outcomes observed in the variant featuring all three traffic lights. These results highlight the critical role of simplicity and clarity in the design of nudging mechanisms, emphasizing the importance of socio-technical considerations in influencing adolescent snack choices. This study provides valuable insights into applying nudging techniques within socio-technical systems, particularly in fostering sustainable behaviors among teenage populations.
Although decisions have been made under risk and uncertainty for thousands of years, theories on decision-making processes started to be formulated once risk and uncertainty were defined. Just as diagnosis is necessary to treat a patient, definition is necessary to theorise and manage a concept. It is not quite possible to manage risks without making a precise distinction between the concepts of uncertainty and risk. The change in the concepts of uncertainty and risk in the last three centuries has also steered the development of decision-making theories. The decision-making process is influenced by emotions, intuitions, personality and experiences. Examining this process under risk and uncertainty also makes it difficult to predict behaviour. This study aims to examine decision-making processes under uncertainty and risk from the perspective of expected utility theory, prospect theory and heuristic approach as well as the effects of cognitive perception and misperceptions on decision-making mechanisms.
This paper is concerned with the methods of the measuring the quality and especially how the decision and game theory can be used in order to reach the goal of measuring quality in general and the quality of electrical equipment, in particular.
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