“YES, I LOVE YOU” – A LOOK INTO DECISION MAKING UNDER UNCERTAINTY

Ever wondered how we arrive at our decisions. We make a number of decisions every minute, in fact at any given point of time we are busy tackling one decision or the other. For example let’s take the hypothetical case of a person who is hungry. From the moment he becomes aware of any change in his physiological condition pointing towards depletion of energy levels in his body, almost instantly he is confronted with decision problems like (a) What to eat? (b) Where to eat? (c) Will it taste good? (d) Will it be healthy? (e) How much to spend? Etc. Faced with a huge number of certain and uncertain variables, confronting each of these seemingly simple but complex decision problems, the person exercises any of the following choices depending upon the desirability of the outcome to him  –

·       Avoid the decision problem altogether (Eg. “Leave it! I am skipping lunch”.)

·       Use a mental short-cut (Heuristics) to arrive at a closer to optimal solution by utilizing past experiences (only) as a guide (Eg. Nearest stall, Most frequented stall etc.)

·       Use a mental short-cut (Cognitive bias or Guess) to arrive at a “probable” least risky proposition. (“I think Indigo Corner would be OK).

·       Undertake an extensive exercise to arrive at the correct solution.

The choice finally exercised by a person would depend upon the complexity (number of known and unknown variables) involved in a particular decision situation, the payoffs involved (reward, e.g. the food being of superior quality, taste etc.), and the relative equation between seeming complexities and seeming payoffs. For e.g. A person looking for a suitable partner for a “one night stand” is confronted with a decision problem with far lesser complexity (due to singular nature of objective) than a person looking for a partner to marry (due to multi faceted nature of objective). Moreover, a flirt will have a higher payoff for a quick shortcut solution than a serious person. Therefore, a flirt is more likely to use heuristics and biases to arrive at a quick solution than a serious person who may have to do an extensive problem solving exercise to arrive at ‘good’ payoff level.

Our decisions with respect to love are also taken in a similar fashion. Which route of decision making you adopt depends upon what type of a person you are (that is depending upon the values and beliefs formed from past decisions and experiences). A flirt will always fall in love with whatever catches his eye, because it will solve his/her problem. While the other category of people may spend a lifetime (or more) trying to arrive at the optimal solution which solves all problems.

Knowledge of Heuristics and biases and how they affect judgment is a recent but important development in the world of behavioral economics. For those who want to know further about the topic may refer to the works of Noble Laureates Daniel Kahneman and Amos Tversky called Judgment under Uncertainty: Heuristics and Biases.  Here’s the link to download the paper http://www.jstor.org/pss/1738360.

Keep Thinking.

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