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TTU - ISQS 5330 - Study Guide

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TTU - ISQS 5330 - Study Guide

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background image ISQS 5330- Decision Theory:  Test 2 Review- Dr. Glenn Browne Information Processing Information Processing Model
Info from Environment -----filter-----  Perception ----filter----  Attention Working Memory 
Long-Term Memory  Limitations of Cognition:
- Perception 1. Processing is generally parallel (we analyze shape, color, and motion); highly selective 
-Attention 1, Highly Selective (depends on salience/importance to me, vividness, prior expectations (i.e.
you’re talking to someone and hear your name so you stop paying attention to your convo and listen to 
- Working memory 1. Speed of Processing (serial and not parallel, divided attention can do something 
simple and another thing at same time but one of those things must require low cognition like washing 
dishes and having a conversation); 2. Capacity (we can hold 4-9 small pieces of information at once in 
working memory like a phone number but only one idea)
- Long-Term Memory 1. Capacity (is not a problem because it can hold so much information; forgetting 
is when you can’t find the path to a memory you haven’t actually lost it and the context is part of the 
memory so it can help you find the path (like where you were when you learned a certain subject)); 2. 
Reconstructive (remember the “gist” and reconstruct the rest; “Flashbulb” memories: accuracy depends 
on salience but many are not very accurate; remember more when emotionally involved in something 
like 9/11 or JFK assassination)
working memory is the bottleneck in cognition*** 
Bounded rationality and satisficing behaviors b/c of this we don’t seek normative solutions to problems 
we seek satisfactory solutions 
Motivation and Affect - Personal Characteristics drive, motivation, personality, values, attitudes toward risk  - Organizational Characteristics politics, incentive systems, organizational structure, leadership, 
value system 
- Almost all managerial decisions rest on the judgments, reasoning, and preferences of people  - The primary bottlenecks and sources of difficulties in such decisions are due to the people, not 
the methods or machines 
background image ISQS 5330- Decision Theory:  Test 2 Review- Dr. Glenn Browne Cognitive Management of Information - System 1 thinking automatic, fast, requires little effort, few cognitive resources utilized, 
sometimes emotional. Based on experience. 
Always operating subconsciously, system 1 is gullible and will believe anything (not very 
- System 2 thinking deliberative, slower, requires moderate to high effort, many cognitive 
resources utilized
Doubting and suspicious, can be programmed to overcome habitual responses generated by 
system 1, when system 2 is busy we default to system 1 and often make mistakes 
- System 1 and 2 operate efficiently and effectively together  Heuristics - Heuristics- mental short cuts, or rules of thumb, for making decisions or taking actions in 
situations; reflect “good enough” but suboptimal cognitive decision-making strategies 
- Availability Heuristic how available information is in your brain (i.e. What is most popular 
beer? You may say Corona or Bud Light but it is actually Snow)
- Anchoring Heuristic you use what you know as an anchor (i.e. what will the weather be in LBK 
tomorrow? Today it is 65 so I think it will be the same)
- Availability, Representativeness, Anchoring, Affect, Confirmation - As we gain experience with a task and refine our heuristics our mode of thought concerning that 
task generally moves from system 2 to system 1 thinking 
- Conclusion: most heuristics work well most of the time. If they don’t we change and refine our 
heuristics. However, b/c they are suboptimal heuristics lead to both random and systematic 
Systematic errors=biases
** draw heuristics graph
As you refine the heuristic you’re getting closer to the desired result (eliminating random errors) Much harder to get rid of systematic error (biases)
background image ISQS 5330- Decision Theory:  Test 2 Review- Dr. Glenn Browne Information Overload - Information overload is one of the most basic outcomes of our limitations on information 
- Causes people stress, lower productivity, lower creativity, information addiction issues  - The more alternatives people have the less likely they are to investigate or purchase and the 
less happy they are with their ultimate choices 
- Combating Info Overload: improved technological filtering mechanisms, improved self-control, 
shutting down servers, better email norms 
- Information overload is often fatal to deliberative, rational decisions - With Information Overload good decisions will likely occur by chance  Behavioral Decision Making - Behavioral Decision Making: attempts to describe how people actually make decisions  Cognitive Biases: biases in reasoning or judgment caused by the ways in which people process 
- Ease of Recall/Retrievability: 
judging the likelihood of an event or frequency of an item by the ease with which it can be 
recalled from memory 
- Insensitivity to Base Rates
not considering the proportion of rate of occurrence of an event or item in the population of 
interest when making judgments of likelihood or frequency 
- Insensitivity to Sample Size
not considering the size of the sample when making judgments. The larger the sample, the more
likely the sample mean will approximate the population mean 
- Misconceptions of Chance (Gambler’s Fallacy)
not considering distributions of outcomes when making judgments. Extreme outcomes and 
streaks happen occasionally (i.e. Roulette: red 8 times so you bet black because ‘it’s bound to be 
black soon’ but that’s not true because every spin has a 50% chance)
- Regression to the Mean
if an extreme outcome occurs, it usually does not persist in successive occurrences of an event 
- Insufficient Anchor Adjustment 
adjustment from an initial anchor is almost always too conservative 
- Disjunctive Events Bias 73%
people generally underestimate the likelihood of one or more independent events occurring 
- Conjunctive Events Bias
people generally overestimate the likelihood of independent events that must occur together or 
in succession 
- Overconfidence
judging events as more likely than external evidence can support (i.e. time interval examples)

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School: Texas Tech University
Department: Science
Course: Decision Theory and Business Analytics
Term: Fall 2016
Description: ISQS 5330- Decision Theory: Test 2 Review- Dr
Uploaded: 07/10/2017
12 Pages 159 Views 127 Unlocks
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