6.2.1 Tradeoff Studies and Cognitive Biases

Abstract

Tradeoff studies involving human subjective calibration and data updating are often distrusted by decision makers. A review of objectivity and subjectivity in decision making shows that Prospect Theory is a good model for actual human decision making. Similarities between the elements of tradeoff studies and the elements of experiments in cognitive science show that tradeoff studies are susceptible to human cognitive biases. Examples of relevant biases are given.

Discrete Event Simulation Combined with Multiple Criteria Decision Analysis as a Decision Support Methodology in Complex Logistics Systems

“…A tradeoff study is the choice of one alternative solution when you have limited decision-making resources that may result in long-or short-term outcomes [14,15]. The main objective of a tradeoff study is thus to arrive at a single final score for each of a number of competing alternative scenarios, using normalizing criteria scoring functions and combining these scores through weighted combining functions.…”

Cognitive Biases Affect the Acceptance of Tradeoff Studies

“…Smith [43] discusses seven dozen biases from the psychology, decision-making, and experimental economics literature that can induce such mistakes. Many of these are also mentioned in [3,32,40] and in popular Web sites such as [29].…”

Ameliorating mental mistakes in tradeoff studies

“…The weights and scores must be combined in order to select the preferred alternatives. [Smith, 2006]. In addition to these four, dozens of other combining functions have been proposed in the literature; each has been "proven" to be most appropriate for specific situations arising from specific axioms or assumptions [Keeney and Raiffa, 1976].…”

“…Humans often make mental mistakes in conducting tradeoff studies. Smith [2006] extracted seven dozen heuristics and biases (including representiveness, an-choring, base-rate neglect, and the conjunction fallacy), cognitive illusions, emotions, fallacies, fear of regret, psychological traps and paradoxes from the psychology, decision-making, and experimental economics literature and showed how they could induce mental mistakes in tradeoff studies. A matrix of relations between cognitive biases and tradeoff study components is available at http://rayser.sie.arizona.edu:8080/resume/Seminar/MatrixOfBiases.zip.…”

“…Recommendation: Training with combining functions is necessary. Discussions of combining functions are found in Keeney and Raiffa [1976], Daniels, Werner, and Bahill [2001], and Smith [2006].…”