judgement and decision making

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Management (MGM)
Bill Mc Conkey

Judgment and decision-making Judgment: evaluation of an object or estimates of likelihood of an outcome or event Decision-making: making a selection among options or course of action Judgments of likelihood and goodness/badness - Estimation of likelihood: judging how likely it is that something will occur\ - Judgments of goodness/badness: evaluating the desirability of something Anchoring and adjustment - anchoring and adjustment process: starting with an initial evaluation and adjusting it with additional information - Initial value can be info or effective response available the memory o or attribute info from external environment encountered first o or consumer value and normative influence - example Starbucks is popular in Japan another coffee shop named itself Seattle coffee to have a positive brand image (anchoring) - Imagery: imagining an event in order to make a judgment o may form a positive bias o Over estimate satisfaction o Focus on vivid attributes Biases in judgment processes - confirmation bias o Focus on judgment that confirms what they believe o Ignore information that counters the judgment - self positivity bias o People believe bad things are more likely to happen to others and themselves o Not process information that suggests they might be vulnerable to risks - negativity bias o More weight on negative information than positive o Do not engage in negative bias when already committed to a brand - mood and bias o Mood served as the initial anchor for judgment o Reduce search for and attention to negative information o Want to preserve good mood - prior brand evaluations o Already judge the brand to be good fail to learn other info about actual brand quality o Favorable brand blocks learning about quality revealing product attributes High effort decisions and high effort decision-making process Deciding which parents to consider - inept set: options that are unacceptable one making the decision - Inert set: options towards which consumers are indifferent - Consideration set: top of mind brands evaluated when making a choice - Attraction effect: when adding an inferior brand to a consideration set increases attractiveness of a dominant brand Deciding which criteria are important to the choice - criterion depends on goals, timing of the decision, and framing Goals - promotion focused goal: maximize gains and positive outcomes - Prevention focused goal: risk adverse emphasize the product efficacy Time - decision is immediate choice based on low level construals (specific or concrete elements) - Decision for future criteria is more general and abstract, consider hedonic aspects of the decision Framing - decision framing: initial reference point or anchor in the decision process - Example buy a car that’s economical or to impress Deciding what brand to choose: thought-based decisions - cognitive decision-making model: process by which consumers combine items of information about attributes to reach a decision - affective decision-making model: process by which consumers based a decision on feelings and emotions - Decision-making style very across culture - Two types of cognitive model o Compensatory model: mental cost-benefit analysis model in which negative features can be compensated for by positive one o Noncompensatory model: simple decision model in which negative information leads to rejection of the option  Less cognitive effort  Cut off levels: each attribute the point at which a brand is rejected with a noncompensatory model Decision based on brands - brand processing: evaluating one brand at a time - Multiattribute expectancy value model: the type of brand based compensatory model o Theory of reasoned action (TORA) o Give more weight to attribute that is consistent with goal - conjunctive model: a noncompensatory model that sets minimum cutoffs to reject bad options o rule out unsuitable alternatives - disjunctive model: a noncompensatory model that sets acceptable cutoffs to find options that are good o based evaluations on several most important attributes Decisions based on product attributes - attribute processing: comparing brands one attribute at a time o Easier than brand processing - additive difference model: compensatory model in which brands are compared by attribute, two brands at a time - Lexicographic model: noncomepensatory model that compares brands by attributes one at a time in order of importance o One option dominate consumer will select it - elimination by aspects model: similar to lexicographic model buts adds the notion of acceptable cut off Decisions based on gains and losses - endowment effect: when ownership increase the value (or loss) of an item Deciding what brand to choose: high effort feeling-based decisions - Affective decision-making: decisions based on feelings and emotions o More satisfied o Frequently experience based Appraisals and feelings - appraisal theory: how our emotions are determined by the way we think about the situation - People or fearful see more risks Affective forecasts and choices - affective forecasting: a prediction of how you will feel in the future -
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