Judgment and Decision-Making Process: Heuristics, Cognitive Biases, and Contextual Influences

Anchoring and Adjustment Heuristic

An initial estimate or value (anchor) can have an undue influence on final judgments or predictions, as adjustment is often insufficient. For example, the decision on what salary to offer a job candidate may be based on his or her current salary. An employer will use current salary as an anchor and then adjust the figure to make an offer, but if the candidate is presently underpaid, the offer will likely be well below her true value. Similarly, a high-status job title can lead to higher job evaluations because raters have an initial expectation about a job after reading its title and do not adequately adjust after being presented with detailed information about that specific job contradicting that belief. Especially troubling is the finding that decision makers are often not aware of, or actively deny, the extent to which provided anchors influence their judgments, even when they feel they have rejected those anchors as inappropriate or biased.

Availability Heuristic

The perceived likelihood or frequency of an event is based on how easily instances come to mind, through either recall or imagination. This is, of course, a generally reasonable heuristic; more common events should be cognitively more available. But the availability heuristic can lead to error when people selectively attend to especially vivid or recent events at the expense of considering more historical or statistical information. Managers often bias annual performance evaluations when they rely only on their memories, because events in the preceding three months, and particularly vivid events, will be given too much weight relative to performance in earlier months and more prosaic behavior.

Representativeness Heuristic

People also assess likelihood based on the degree to which a situation resembles, or is representative of, their stereotype of that event. Perceived similarity has a pervasive effect on how we perceive other people. We expect people to resemble our prototype of the category of which they are members, and we judge their suitability for a role based on our prototype of that role. Thus the glass-ceiling effect can be partially explained by the fact that prototypes of executives may not include women and minorities. Although judgments based on representativeness are often accurate, this heuristic also causes people to neglect base rates (the prior probabilities of outcomes) and to be influenced by irrelevant attributes. For example, a number of studies have found that employers evaluate job applicants and employees more favorably when they perceive them as similar to themselves. These similarity judgments are often based on irrelevant factors such as demographics, interests, and general attitudes unrelated to job performance. Most employers view themselves as being exceptionally capable, and the representativeness heuristic causes them to expect people who are similar to them to be equally effective.

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