The Science of Decision-Making: Heuristics

Every day we use our brains to interact with other people, solve problems and make decisions. Every decision we make has a potential impact on our next decision. A certain decision, and the outcome that follows, could stick with you long after the decision was made and unconsciously determine your next.

To make decision-making more efficient, your brain creates mental shortcuts to help you make the right decision faster. These mental shortcuts are called heuristics, and are a main theme of behavioral economics.

Heuristics are deviations from rationality formed by previous experiences. Instead of relying on the information at hand to make a decision, an individual might reference past decisions or events that may not be directly relevant to the current problem. Stereotyping, “rules of thumb” and the concept of common sense utilize heuristic methods.

Today I’ll focus on three well-known and common heuristics: anchoring, familiarity heuristics and availability heuristics.

Say I’m looking for a movie to see this upcoming weekend. I obviously have a difficult decision to make, as there are several movies showing. I finally decide on a movie, and when my friend asks why I chose that specific film I tell her, “It has Bradley Cooper in it! He’s a great actor!” While this logic seems completely sound to me, it’s not an example of rational judgment. Who else is in the movie? What is the movie about? Did it get good reviews? I did not consider these other options fully when making my decision; I simply saw a “big name” and an actor I’ve enjoyed in the past. A rational individual would (theoretically) consider every aspect of the film before deciding to watch it, while I simply focused on the actor starring in it. Anchoring is the tendency to focus on the first piece of information received when making a decision. Hollywood has relied on our tendency to anchor for decades. If moviegoers see that an actor that they’re familiar with or like is starring in a movie, they tend to have a more favorable opinion of it. Posters and trailers are often used to showcase famous names and faces. And the stars’ awards and accolades are advertised as justification for seeing a film. Anchoring is a common human tendencies, stemming from the idea that the information we receive first is what is most important (e.g. “first impressions”, “what you see is what you get”). It’s very difficult to avoid, even with incentives and/or full awareness of the anchoring

Imagine you’re heading to the grocery store for some snacks. You walk down the snack aisle until you get to the crackers. You see there are three main brands available: Ritz, Cheez-its and Premium Plus. The three brands of crackers have varying flavors, prices, box sizes, ingredients, etc. That’s a lot of variables to consider. You spend all of 30 seconds looking at the cracker selection; grab a box of Ritz and head to the register. Why Ritz? It’s simple: your mom bought Ritz when you lived at home. You are more familiar with Ritz crackers, you’ve eaten Ritz crackers your entire life. Why would you choose any other kind? The familiarity heuristic occurs when an individual chooses to utilize familiar options and processes rather than trying something new. Nostalgia and trial-and-error both utilize the familiarity heuristic. The brands, foods and music you know best are more likely to impact your decisions than those you are unfamiliar with. The familiarity heuristic is a primary focus of consumer behavior: companies want to make sure that you become familiar with their brand early on, to ensure that you will favor their brand over others in the future.

I was talking to a few friends the other day about animal attacks. I asked them whether they thought shark attacks or lightning strikes caused more deaths per year in the US. Most of them insisted that shark attacks caused more deaths per year. It makes sense at first: people are in the ocean every day and sharks are dangerous predators, but in reality only 36 fatal shark attacks have occurred in the US in the past 400 years while 26 people died from lightning strikes in 2014 alone. Shark attacks and lightning fatalities are both very rare, but why would people assume shark attacks were more common? The availability heuristic causes people to rely on the thing that comes to their mind first, or they hear about more frequently. When a shark attacks in the US, it is often covered extensively in the media. Lightning strikes are reported on much less, even fatal ones. When someone reads articles about shark attacks, along with sensational programming like Discovery Channel’s Shark Week or Steven Spielberg’s Jaws, data and information about shark attacks is more readily available in their mind. This is referred to as ease of recall: the more you hear about shark attacks the easier it is for it to pop up in your mind later. If something is fresh in your mind or easily remembered, the availability heuristic determines it must be significant in some way. When asked whether shark attacks or lightning strikes were more deadly, more of my friends claimed shark attacks were more deadly because they hear about them more often and thus tend to be more vivid in their mind.

Heuristics are referred to in many fields, from behavioral economics to psychology to political science. I only covered three types of heuristics in this post. There are many other types of heuristics and biases that influence your perceptions and decisions. Behavioral economics exists to explore and define these biases in order to better model real people and their behavior when working with scarce resources and/or making decisions. Being more aware of these mental shortcuts can lead you to more rational decision-making and better judgment.

This is the second post of a (now) four-part series on behavioral economics. Next week we’ll cover framing and explore how you approach problems and how they can affect your decision-making.


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