Hello Martha Guy students!

Hello Martha Guy students! How ya doin’? Making any life-altering decisions this summer? 1

Perception is the first step in decision making • The process by which individuals organize and interpret their sensory impressions in order to give meaning to their environment. 2

Perception • The world as it is perceived is what makes reality for us • Average age Americans say one is “adult”: 28 • Female Presidents (past or present): Brazil, England, Ireland, Chile, Ecuador, Haiti, Nicaragua, Finland, Germany, Latvia, Indonesia, Sri Lanka, Liberia, Argentina, Iceland, Guyana, Philippines, India, Switzerland, Serbia, etc. • The meaning of the Confederate flag. 3

Competing environmental stimuli • People • Events • Objects Interpretation and categorization Judgments and decisions Perception: An Information Processing Model Stage 1 Selective Attention/ Comprehension Stage 2 Encoding and Simplification Stage 3 Storage and Retention Stage 4 Retrieval and Response A B C D E F A C F C Memory Using schemas! 4

Schemas can cause trouble! Stereotypes 7-5 • An individual’s set of beliefs about a group

Imp Characteristics of Stereotypes • They are not always negative • May or may not be accurate • Are Southerners dumb? • Can white men jump? • Are car salesman dirtbags? • Are older workers more accident prone? • Can lead to poor decisions 6

Perceptual error • Fundamental Attribution Biasignoring environmental factors that affect behavior • Self-Serving Biasignoring internal factors when we make mistakes 7

Rational Decision-Making Model 8

What % of African countries has official membership in the United Nations? 10

Rational Decision Making • Consider buying a lottery ticket offering 1/1000 chance of winning $5000. What is the “fair” price for the ticket? • A: (1/1000) x $5000 = $5 • Problem: Why are lotteries and gambling so popular? • Heuristics – limitations to rational decision-making 11

Rational Decision Making 13. You are near some train tracks. Go there in your mind. There are 5 workers on the track, working. They’ve got their backs turned to the trolley, which is coming at them in the distance. They don’t see it, you can’t shout to them, and if you do nothing, the 5 workers will die. You have two choices. Which do you choose: A) Do nothing. 5 people will die. B) Next to you is a lever. If you pull the lever, the trolley will jump to a side track where there is only 1 person working. The trolley will only kill that one person. • 90% choose B 12. You are standing on a footbridge that passes over some train tracks. Go there in your mind. There are 5 workers below on the track, working. They’ve got their backs turned to the trolley, which is coming at them in the distance. They don’t see it, you can’t shout to them, and if you do nothing, the 5 workers will die. You have two choices. Which do you choose: A) Do nothing. 5 people will die. B) Next to you is a very large person. If you push the person off of the footbridge, he/she will fall to their death, but they are large enough to effectively stop the oncoming train from killing the other 5 men. You decide to push the person next to you off the footbridge into the oncoming train. • 90% Choose A 12

% of countries that have official membership in the UN: If given 10%: answer is 25% If given 65%: answer is 45% 13

Anchoring and Adjustment • Initial info. obtained by individuals biases future decisions • People insufficiently adjust • in negotiations, once someone states a number, the ability to ignore that number has been weakened. • E.g., if a prospective employer asks how much you were making in a prior job, it often anchors the offer. 14

Framing the Outcomes Imagine that a terrorist bomber has attacked and done great damage to a federal building in Charlotte, and 60,000 people are at risk for death, precariously balanced on an unstable concrete slab hundreds of feet above the ground. Two rescue plans have been formulated, which do you choose? • Saved Group (Group A, Q1) • If Program A is adopted, 20,000 people will be saved • If Program B is adopted, there is a 1/3 probability that 60,000 people will be saved and a 2/3 probability that no people will be saved • Stated in terms of gains, people like to maintain a position above their status quo/prior situation. People are risk-averse in gain situations. 72% of people choose A. • Die Group (Group B, Q7) • If Program A is adopted, 40,000 people will die • If Program B is adopted, there is a 1/3 probability that nobody will die and a 2/3 probability that 60,000 people will die • Stated in terms of losses, the best alternative is a return to the status quo. People are risk-seeking in loss situations. 78% or people choose B. 15

Framing the Outcomes • Losses loom larger than gains. • You should consider each situation in terms of total assets rather than in gains or losses. 16

Losses and Costs Group A #3) Would you accept a gamble that offers a 90% chance to lose $5 and a 10% chance to win $95? Group B #10) Would you participate in a lottery that offers a 10% chance to win $100 and a 90% chance to win nothing? The cost is $5. -Most people will say “yes” to 10, “no” to 3, although mathematically they are exactly the same. When in a loss situation, people would rather have it framed as a “cost” rather than a “loss”. 17

A2) You are shopping at the mall for a new jacket and a new calculator for the upcoming school year. You can purchase the jacket here for $250 and the calculator for $20. However, a store a mile away has the calculator on sale for $10. Do you make the trip to buy the calculator? B9) You are shopping for a new jacket and a new calculator for the upcoming school year. You can purchase the jacket at the store you are currently at for $250 and the calculator for $20. However, a shop 1 mile away had the jacket for $240 on sale. Do you make the trip to buy the jacket? A5) Imagine that you have decided to see a concert and paid the admission price of $100 per ticket. As you enter the auditorium you discover that you have lost the ticket. The seat was not marked and the ticket cannot be recovered. Would you pay $100 for another ticket so that you can still see the concert? B8) Imagine that you have decided to see a concert where admission is $100 per ticket. As you enter the auditorium, you discover that you have lost a $100 bill. You have not yet bought your ticket. Would you still pay $100 for the concert ticket? 18

Mental Accounting • We tend to irrationally separate mental calculations into categories 19

Insensitivity to Sample Size • Effects of Sample Size on variation Did anyone answer larger or about the same for 4? 4) A certain town is served by two hospitals. In the larger hospital about 45 babies are born each day, and in the smaller hospital about 15 babies are born each day. As you know, about 50% of all babies are boys. However, the exact percentage varies from day to day. Sometimes it may be higher than 50%. Sometimes lower. For a period of 1 year, each hospital recorded the days on which more than 60% of babies born were boys. Which hospital do you think recorded more such days? A: The smaller hospital. Large samples are much less likely to stray from 50% than smaller samples. Think about height – avg. 6’ more like to occur in world sample or a sample of 5 people? 20

Availability Heuristic • Your ability to imagine, bring examples to mind of an event influences your perceptions of success • Availability – assessing the frequency or probability of an event by availability in memory. (Open a Subway vs B-B Wholesaler) Question 6. Which would you expect to find more words in the dictionary? • _ _ _ _ ing b) _ _ _ _ _ n _ Answer: Option B. All words ending with “ING” also are included in “_N_” 21

Examples of Availability Heuristic • We fear what we cannot control (airline seat, not car seat) • We fear what is immediate (airline take off is now, smoking kills over 400,000 Americans annually….but that is distant) • We fear threats readily available in memory (terrorism) • Similarly, we have a tendency to feel proportionately little concern for the many victims of genocide, and greater moral concern for dramatically portrayed individual victims. People are more willing to contribute $ to support a single starving child than to support many such children. Numbers seem to interfere with people’s feelings of compassion. • Mother Theresa “If I look at the mass, I will never act. If I look at the one, I will.” 22

Common Biases and Errors • Confirmation Bias – we tend to seek out information that reaffirms our past choices and discount information that contradicts past judgments • We tend to accept info at face value that confirms out preconceived views, while being critical/skeptical of info that challenges these views. Info we gather is biased towards supporting our current views. • Republicans as good for the economy? Democrats as refusing to use military? 23

Emotions and Decision-making • Subjects watched either: • Documentary or a tear-jerker • Subjects were paid $10 for participation in the study. Then allowed to use the $$$ to purchase a “really nice water bottle”. • Documentary subjects paid an avg of $.56 cents for the water bottle; tear-jerker subjects paid an avg of $2.11 for the same bottle (almost 4 x as much). Retail therapy! • http://www.npr.org/templates/story/story.php?storyId=89761759 Moods have an impact. • After watching SNL, ethical violations seen as less offensive. • After reading “Chicken Soup for the Soul” (mood elevation trigger) or smelling a mock-flatulence spray (disgust trigger) people are more offended by ethical violations. 24

Bounded Rationality When you consider what university to attend, do you look at every viable alternative, identify all of the criteria, evaluate each criteria on every alternative? • The limited information-processing capability of human beings makes it impossible to assimilate and understand all the information necessary to optimize • So people seek solutions that are satisfactory and sufficient, rather than optimal (called “satisficing”) • Bounded rationality is constructing simplified models that extract the essential features from problems without capturing all their complexity. A limited list of alternatives are examined until one is found as “good enough” (not optimal). Order of alternatives is important, research shows that those more closely related to current practice are examined first, riskier alternatives later. “Good enough” solution may be found before riskier alternative analyzed (which may be an optimizer). 25

So what? Decision-making, framing and interpretation matter in the real world, it has implications for public policy and our personal lives. • Do you as an employer fire a loyal employee with a family for the good of the company? • Do you donate to a single sick child rather than to an aid organization that could save several children? Just knowing that our decision-making instincts are so sensitive to outside factors can prevent us from settling on our first knee-jerk response. We can encourage consistency in our reasoning by viewing issues from many angles, discussing them with other people, and monitoring our emotions. 26

Rational Decision-Making Model 27

Assumptions of the Model • The problem is clear and unambiguous • All options are known • Clear preferences • Constant preferences • No time or cost constraints • Choice represents maximum payoff 28

Norms - The Hawthorne Studies • Group influences were significant in affecting individual behavior. • Group standards were highly effective in establishing enhanced individual worker output (higher status, higher performance). • Money was less a factor in determining worker output than were group standards, sentiments, and security. • “Don’t be a ratebuster (doing too much work), chiseler (too little work), or a squealer.” Were concerned mgt would increase output requirements too much. Members would ostracize norm violators (sarcasm, name-calling, ridicule, physical violence). 29

Elevator Norms • Where do people stand when there are 2 or 3 people? • What happens when a 4th person enters? • How would you feel if there were 2 people on the elevator, and a 3rd entered and stood right next to you? • What is allowed to “touch”? • What do people look at in a crowded elevator? • What subjects do you discuss with strangers in an elevator? 30

The Elevator: Norms of Physical Contact/Communication • If there are only 2 or 3 people on an elevator, most are against the walls. If fourth person enters, 4-corners. • People touch only at the shoulders or upper arms if it’s very crowded. People usually scrunch up, rounding their shoulders, bags & purses hang towards the ground so they take up as little space as possible. • Everyone looks at the door or at the floor indicator. • Unless you know someone, you usually won’t speak. If you do, it is very softly, and about a superficial shared experience. If you are skeptical, try getting into a crowded elevator and instead of facing the door, face the other occupants. See how they react. Give them a big smile and say “Why so serious?” 31

Conformity and the Asch Studies Members desire to be one of the group and avoid being visibly different (the elevator) Members with differing opinions feel extensive pressure to align with others Asch: Compare which lines matched. • Working independently, accuracy over 99%. • Asch had 8 people sit around a table in a group. 7 “people” stated their answers first, 75% of subjects gave at least 1 answer that “conformed”. 32

Deviant Workplace Behavior • Voluntary behavior that violates significant organizational norms and, in doing so, threatens the well-being of the organization or its members • Production (leaving early, working slowly, wasting resources) • Property (sabotage, lying about hrs worked, stealing) • Political (showing favoritism, gossiping, blaming coworkers) • Aggression (sexual harassment, verbal abuse, stealing from coworkers) • It is likely to flourish where it is supported by group norms 33

In my Organizational Behavior course, we study: • How to improve individual decision-making • How to improve ethical decision-making • How to create the conditions for effective groups and teams in decision-making • How to avoid organizational and interpersonal issues in decision-making 34

Hello Martha Guy students!