View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by OTHES DIPLOMARBEIT Titel der Diplomarbeit Cognitive Heuristics and Biases and Their Impact on Negotiations Verfasserin Martina Györik Angestrebter akademischer Grad Magistra der Sozial- und Wirtschaftswissenschaften (Mag. rer. soc. oec.) Wien, im November 2010 Studienkennzahl lt. Studienblatt: A 157 Studienrichtung lt. Studienblatt: Internationale Betriebswirtschaft Betreuer: O. Univ.-Prof. Mag. Dr. Rudolf Vetschera Dedicated to my parents Table of Contents Table of Contents 1. Introduction .................................................................................................. 1 2. The Nature of Human Decision Behavior .............................................. 3 2.1 The Architecture of Cognition .................................................................................................. 3 2.2 Problem Solving, Choice and Judgment .................................................................................. 4 2.3 An Outlook on Decision Analysis ............................................................................................ 6 3. Models of Rationality................................................................................... 9 3.1 Homo œconomicus ..................................................................................................................... 9 3.2 The Concept of Bounded Rationality ..................................................................................... 11 4. Cognitive Heuristics: An Approach ........................................................ 13 4.1 An Introductory Example ........................................................................................................ 13 4.2 Context-sensitive Reasoning .................................................................................................... 14 4.3 Heuristics and History .............................................................................................................. 15 5. The Heuristics and Biases Program ........................................................ 17 5.1 Representativeness ..................................................................................................................... 18 5.1.1. The Conjunction Fallacy ...................................................................................................................................... 19 5.1.2 Base-rate Neglect .................................................................................................................................................... 21 5.1.3 Attribute Substitution ........................................................................................................................................... 22 5.2 Availability .................................................................................................................................. 23 5.3 Anchoring and Adjustment ...................................................................................................... 24 5.4. The Affect Heuristic.................................................................................................................. 25 5.5 Critique on the ‘Heuristics and Biases’ Program .................................................................. 27 5.5.1 The Conjunction Fallacy Revisited ..................................................................................................................... 27 5.5.2 Bayesian Reasoning Revisited .............................................................................................................................. 28 5.6 The Difference between Judgmental and Choice Heuristics .............................................. 29 6. ABC’s Heuristics: The Adaptive Toolbox ............................................. 30 6.1. Visions of Rationality ................................................................................................................ 30 6.2 Characteristics of Fast and Frugal Heuristics ........................................................................ 32 6.3 Classes of Heuristics .................................................................................................................. 34 6.3.1 Ignorance-Based Decision Making: The Recognition Heuristic ........................................................ 35 6.3.2 One-Reason Decision Making ............................................................................................................................ 38 6.3.2.1 The Minimalist .............................................................................................................................................. 39 Table of Contents 6.3.2.2 Take the Last ................................................................................................................................................. 40 6.3.2.3 Take the Best ................................................................................................................................................ 40 6.3.3 Elimination Heuristics .......................................................................................................................................... 42 6.3.3.1 Quick Estimation ......................................................................................................................................... 42 6.3.3.2 Categorization by Elimination ................................................................................................................... 43 6.4 When do People Use (Simple) Heuristics? ............................................................................ 45 6.5 The Influence of Emotions and Social Context ................................................................... 46 6.6 Critique on ABC’s Heuristics ................................................................................................... 47 6.7 Challenges Ahead: What remains to be answered ................................................................ 51 7. Negotiations ................................................................................................ 52 7.1 Characteristics of Negotiations ................................................................................................ 52 7.2 An Outlook on Negotiation Analysis ..................................................................................... 55 8. Judgmental Heuristics in Negotiations ................................................... 57 8.1 Framing ...................................................................................................................................................................... 57 8.2 Anchoring and Adjustment ................................................................................................................................... 58 8.3 Availability ................................................................................................................................................................ 58 8.4 The Mythical Fixed-Pie ........................................................................................................................................... 59 8.5 The Irrational Escalation of Commitment ......................................................................................................... 60 9. Discussion: A Critical Review of ABC’s Heuristics in Comparison to the Heuristics and Biases Program and Their Suitability for Negotiations.63 10. Literature ..................................................................................................... 70 10.1 Books ......................................................................................................................................... 70 10.2 Scientific Papers ......................................................................................................................... 71 11. Appendix ....................................................................................................... I Abstract (English) ..................................................................................................................................... I Abstract (German) .................................................................................................................................... I Resume ..................................................................................................................................................... II Lebenslauf .............................................................................................................................................. III Table of Figures Table of Figures Fig 1: Two Cognitive Systems. ................................................................................................................... 4 Fig 2: A Conceptual Model of Judgment .................................................................................................. 6 Fig 3: A Simplified Flowchart of the Decision Analysis Process .......................................................... 8 Fig 4: The Gaze Heuristic ......................................................................................................................... 13 Fig 5: The M A Paradigm ....................................................................................................................... 20 Fig 6: Stages of the Anchoring Mechanism .........................................................................................