Search

Heuristics are often viewed as inferior to "rational" strategies that exhaustively search and process information. Introducing the theoretical perspective of ecological rationality, we challenge this view and argue that, under conditions of uncertainty common to managerial decision making, managers can actually make better decisions using fast-and-frugal heuristics. Within the context of personnel selection, we show that a heuristic called Δ-inference can more accurately predict which of two job applicants would perform better in the future than can logistic regression, a prototypical rational strategy. Using data from 236 applicants at an airline company, we demonstrate, in Study 1, that, despite searching less than half of the cues, Δ-inference leads to more accurate selection decisions than logistic regression. After this existence proof, we examine, in Study 2, the ecological conditions under which the heuristic predicts more accurately than logistic regression using 1,728 simulated task environments. Finally, in Study 3, we show in an experiment that participants adapted their strategies to the characteristics of a task—and increasingly so the greater their previous experience in selection decisions. The aim of this article is to propose ecological rationality as an alternative to current views about the nature of heuristics in managerial decisions. [ABSTRACT FROM AUTHOR]

Narratives and heuristics are both tools for dealing with uncertainty, intractability, and incommensurability, that is, for all real-world situations outside the domain of Bayesian decision theory. But how do narratives and heuristics relate? I suggest two links: Heuristics select narratives to explain events, and "big" narratives select the heuristics that people live by, to execute their values and moral principles. [ABSTRACT FROM AUTHOR]

Heuristics are simple rules that experts and laypeople rely on to make decisions under uncertainty as opposed to situations with calculable risk. The research program on fast‐and‐frugal heuristics studies formal models of heuristics and is motivated by Herbert Simon's seminal work on bounded rationality and satisficing. In this article, we first introduce the major theoretical principles (e.g., ecological rationality) and research approaches (e.g., competitive testing) that have been adopted in this research program, and then illustrate these principles and approaches with two heuristics: take‐the‐best and fast‐and‐frugal trees. We describe conditions under which simple heuristics predict as accurately as or better than more complex models, despite requiring less effort. We close by pointing out several issues that need to be further studied and better understood in the research on fast‐and‐frugal heuristics. [ABSTRACT FROM AUTHOR]

Intelligence evolved to cope with situations of uncertainty generated by nature, predators, and the behavior of conspecifics. To this end, humans and other animals acquired special abilities, including heuristics that allow for swift action in face of scarce information. In this article, I introduce the concept of embodied heuristics, that is, innate or learned rules of thumb that exploit evolved sensory and motor abilities in order to facilitate superior decisions. I provide a case study of the gaze heuristic, which solves coordination problems from intercepting prey to catching a fly ball. Various species have adapted this heuristic to their specific sensorimotor abilities, such as vision, echolocation, running, and flying. Humans have enlisted it for solving tasks beyond its original purpose, a process akin to exaptation. The gaze heuristic also made its way into rocket technology. I propose a systematic study of embodied heuristics as a research framework for situated cognition and embodied bounded rationality. [ABSTRACT FROM AUTHOR]

Purpose: This research explores how investment and central bankers cope with strategic uncertainty when they anticipate prices. The uncertainty originates from others' decisions and their consequences, and cannot be meaningfully reduced to risk. The authors postulate that, in order to cope with this type of uncertainty, bankers use simple rules, also called heuristics. This study aims to identify such heuristics and the psychological processes that underlie them. Design/methodology/approach: The authors interviewed 22 managers of teams tasked to anticipate prices, in two leading investment and central banks. The primary data came from in-depth, semi-structured interviews lasting 30–60 min, supplemented by our observations during the on-site visits, emails and phone calls when preparing the interviews, and reports published by the banks. Data were coded and heuristics were induced over multiple rounds by multiple researchers. Findings: Bankers (1) construct simple game representations of markets, (2) make inferences to gauge opponents, (3) become alert when they see too much agreement and (4) communicate coherent narratives. Heuristics (1)–(3) are employed when the pace of decision-making is fast, whereas (4) is used for longer time scales. In sum, bankers exhibit reciprocal bounded rationality, wherein interaction partners are mutually aware of and adapted to the fundamental uncertainty of the task and their limited resources. Originality/value: Heuristics for anticipating prices have not been studied empirically outside the lab. The findings may help integrate conceptualizations of heuristics in the simple-rules and fast-and-frugal-heuristics research programs and improve market efficiency. [ABSTRACT FROM AUTHOR]

Performance science is a fairly new multidisciplinary field that integrates performance domains such as sports, medicine, business, and the arts. To give its many branches a structure and its research a direction, it requires a theoretical framework. We demonstrate the applications of this framework with examples from sport and medicine. Because performance science deals mainly with situations of uncertainty rather than known risks, the needed framework can be provided by the fast-and-frugal heuristics approach. According to this approach, experts learn to rely on heuristics in an adaptive way in order to make accurate decisions. We investigate the adaptive use of heuristics in three ways: the descriptive study of the heuristics in the cognitive "adaptive toolbox;" the prescriptive study of their "ecological rationality," that is, the characterization of the situations in which a given heuristic works; and the engineering study of "intuitive design," that is, the design of transparent aids for making better decisions. [ABSTRACT FROM AUTHOR]

In the management literature, heuristics are often conceived of as a source of systematic error, whereas logic and statistics are regarded as the sine qua non of good decision making. Yet, this view can be incorrect for decisions made under uncertainty, as opposed to risk. Research on fast and frugal heuristics shows that simple heuristics can be successful in complex, uncertain environments and also when and why this is the case. This article describes the conceptual framework of heuristics as adaptive decision strategies and connects it with the managerial literature. We review five classes of heuristics, analyze their common building blocks, and show how these are applied in managerial decision making. We conclude by highlighting some prominent opportunities for future research in the field. In the uncertain world of management, simple heuristics can lead to better and faster decisions than complex statistical procedures. Copyright © 2014 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

This paper presents an axiomatic framework for the priority heuristic, a model of bounded rationality in Selten's (in: Gigerenzer and Selten (eds.) Bounded rationality: the adaptive toolbox, ) spirit of using empirical evidence on heuristics. The priority heuristic predicts actual human choices between risky gambles well. It implies violations of expected utility theory such as common consequence effects, common ratio effects, the fourfold pattern of risk taking and the reflection effect. We present an axiomatization of a parameterized version of the heuristic which generalizes the heuristic in order to account for individual differences and inconsistencies. The axiomatization uses semiorders (Luce, Econometrica 24:178-191, ), which have an intransitive indifference part and a transitive strict preference component. The axiomatization suggests new testable predictions of the priority heuristic and makes it easier for theorists to study the relation between heuristics and other axiomatic theories such as cumulative prospect theory. [ABSTRACT FROM AUTHOR]

Psychology’s most important task is to integrate the various extant patchworks of theories into overarching theories. Theory integration is a longstanding concern in biology, economics, or physics, but not in psychology. We teach our students how to test theories, not the art of theory construction in the first place. As a consequence, in some parts of psychology, theories have become replaced by surrogates, such as circular restatements of the phenomenon, one-word explanations, and lists of general dichotomies. Moving backwards from existing models to labels is an odd event in science, which typically progresses in the opposite direction. Theory construction should be taught in graduate school, and editors of major journals should encourage submissions that make advances in theory integration. [ABSTRACT FROM PUBLISHER]

What is the nature of moral behavior? According to the study of bounded rationality, it results not from character traits or rational deliberation alone, but from the interplay between mind and environment. In this view, moral behavior is based on pragmatic social heuristics rather than moral rules or maximization principles. These social heuristics are not good or bad per se, but solely in relation to the environments in which they are used. This has methodological implications for the study of morality: Behavior needs to be studied in social groups as well as in isolation, in natural environments as well as in labs. It also has implications for moral policy: Only by accepting the fact that behavior is a function of both mind and environmental structures can realistic prescriptive means of achieving moral goals be developed. [ABSTRACT FROM AUTHOR]

Heuristics are efficient cognitive processes that ignore information. In contrast to the widely held view that less processing reduces accuracy, the study of heuristics shows that less information, computation, and time can in fact improve accuracy. We review the major progress made so far: (a) the discovery of less-is-more effects; (b) the study of the ecological rationality of heuristics, which examines in which environments a given strategy succeeds or fails, and why; (c) an advancement from vague labels to computational models of heuristics; (d) the development of a systematic theory of heuristics that identifies their building blocks and the evolved capacities they exploit, and views the cognitive system as relying on an “adaptive toolbox;” and (e) the development of an empirical methodology that accounts for individual differences, conducts competitive tests, and has provided evidence for people’s adaptive use of heuristics. Homo heuristicus has a biased mind and ignores part of the available information, yet a biased mind can handle uncertainty more efficiently and robustly than an unbiased mind relying on more resource-intensive and general-purpose processing strategies. [ABSTRACT FROM AUTHOR]

M. R. Dougherty, A. M. Franco-Watkins, and R. Thomas (2008) conjectured that fast and frugal heuristics need an automatic frequency counter for ordering cues. In fact, only a few heuristics order cues, and these orderings can arise from evolutionary, social, or individual learning, none of which requires automatic frequency counting. The idea that cue validities cannot be computed because memory does not encode missing information is misinformed; it implies that measures of co-occurrence are incomputable and would invalidate most theories of cue learning. They also questioned the recognition heuristic's psychological plausibility on the basis of their belief that it has not been implemented in a memory model, although it actually has been implemented in ACT-R (L. J. Schooler & R. Hertwig, 2005). On the positive side, M. R. Dougherty et al. discovered a new mechanism for a less-is-more effect. The authors of the present article specify minimal criteria for psychological plausibility, describe some genuine challenges in the study of heuristics, and conclude that fast and frugal heuristics are psychologically plausible: They use limited search and are tractable and robust. [ABSTRACT FROM AUTHOR]

Traditional views of rationality posit general-purpose decision mechanisms based on logic or optimization. The study of ecological rationality focuses on uncovering the “adaptive toolbox” of domain-specific simple heuristics that real, computationally bounded minds employ, and explaining how these heuristics produce accurate decisions by exploiting the structures of information in the environments in which they are applied. Knowing when and how people use particular heuristics can facilitate the shaping of environments to engender better decisions. [ABSTRACT FROM AUTHOR]

Bernoulli's framework of expected utility serves as a model for various psychological processes, including motivation, moral sense, attitudes, and decision making. To account for evidence at variance with expected utility, the authors generalize the framework of fast and frugal heuristics from inferences to preferences. The priority heuristic predicts (a) the Allais paradox, (b) risk aversion for gains if probabilities are high, (c) risk seeking for gains if probabilities are low (e.g., lottery tickets), (d) risk aversion for losses if probabilities are low (e.g., buying insurance), (e) risk seeking for losses if probabilities are high, (f) the certainty effect, (g) the possibility effect, and (h) intransitivities. The authors test how accurately the heuristic predicts people's choices, compared with previously proposed heuristics and 3 modifications of expected utility theory: security-potential/aspiration theory, transfer-of-attention-exchange model, and cumulative prospect theory. [ABSTRACT FROM AUTHOR]

Abstract: The Centre for Adaptive Behaviour and Cognition (ABC) has hypothesised that much human decision-making can be described by simple algorithmic process models (heuristics). This paper explains this approach and relates it to research in biology on rules of thumb, which we also review. As an example of a simple heuristic, consider the lexicographic strategy of Take The Best for choosing between two alternatives: cues are searched in turn until one discriminates, then search stops and all other cues are ignored. Heuristics consist of building blocks, and building blocks exploit evolved or learned abilities such as recognition memory; it is the complexity of these abilities that allows the heuristics to be simple. Simple heuristics have an advantage in making decisions fast and with little information, and in avoiding overfitting. Furthermore, humans are observed to use simple heuristics. Simulations show that the statistical structures of different environments affect which heuristics perform better, a relationship referred to as ecological rationality. We contrast ecological rationality with the stronger claim of adaptation. Rules of thumb from biology provide clearer examples of adaptation because animals can be studied in the environments in which they evolved. The range of examples is also much more diverse. To investigate them, biologists have sometimes used similar simulation techniques to ABC, but many examples depend on empirically driven approaches. ABC''s theoretical framework can be useful in connecting some of these examples, particularly the scattered literature on how information from different cues is integrated. Optimality modelling is usually used to explain less detailed aspects of behaviour but might more often be redirected to investigate rules of thumb. [Copyright &y& Elsevier]

Examines the concept of recognition heuristic in the field of psychology. Domain of probability theory; Analysis of variance and Bayesian methods; Ecological rationality of the recognition heuristic.

Discusses an alternative to the doctrine of rational choice. Examples of heuristics; Darwinian rationality; Brand name recognition.

Explores the rules in fast and frugal heuristics. Visions of rationality; Classes of heuristics; Why and when do simple heuristics work; How simple heuristics can be evaluated; Commentaries on several issues presented in the article.

Clarifies author's critique of the heuristics-and-biases approach to statistical reasoning. Imposition of narrow norms of sound reasoning; Continuing reliance on vague heuristics.

The article discusses efforts to train medical students on assessing and communicating information from articles as part of evidence-based medicine (EBM). Topics include the use of a heuristic for evaluating medical research, education on the use of risk communication in medical decision making, and the use of a Fact Box format for the extraction of data.