Errors in Decision Making

Errors in Decision Making

1. Overconfidence error

   • When we're given factual questions and asked to judge the probability that our answers are correct, we tend to be far too optimistic.
     • For instance, studies have found that, when people say they're 65 to 70% confident that they're right, they were actually correct only about 50% of the time. And when they say they're 100% sure, they tended to be 70 to 85% correct.
       • So as mangers and employees become more knowledgeable about an issue, the less likely they are to display overconfidence.
   • We think we know more than we actually do

2. Bibliografías: Lombardi, R. (2014). Systematic errors in decision making processes. International journal of applied decision sciences, 239. Daellenbach, H. 1994. Systems and Decision Making: A Management Science Approach. Wiley.

3. Anchoring effect

   • Influences you to rely too heavily on the first piece of information you receive.
     • Imagine you are a teenager girl
       • You want some jeans that costs $149.95.
         • But your mom doesn't buy it because are to expensive. Later, the saleswomen tells you that those jeans are with discount of 25%.
           • How do you know how much you should pay for something? How do you know what’s a deal and what’s a ripoff? You need some sort of reference point. A cue to help you evaluate. For your daughter, the reference point is $149.95. The discount makes it a real bargain, so why is Mom still giving me a hard time? Your reference point, however, is quite different. You remember, when you were a kid, a great pair of jeans cost no more than $50. Sure, prices have gone up but three times the price? Crazy! No, in your mind, these jeans are way too expensive. The anchoring effect is a cognitive bias that influences you to rely too heavily on the first piece of information you receive. And it’s not just a factor between the generations. Stores use it all the time to convince you to buy.

4. Conclusion: Yes, the ethical responsability are intended to help statistics practitioners make decisions ethically. Additionally, the Ethical Guidelines aim to promote accountability by informing those who rely on statistical analysis of the standards that they should expect. The discipline of statistics links the capacity to observe with the ability to gather evidence and make decisions, providing a foundation for building a more informed society. Because society depends on informed judgments supported by statistical methods, all practitioners of statistics, regardless of training and occupation or job title, have an obligation to work in a professional, competent, and ethical manner and to discourage any type of professional and scientific misconduct

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