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How do we make decisions?


August 6, 2016 by cathyk

One of the most exhilarating game shows I’ve seen is Deal or No Deal. Since the rules take too long to explain, I’ll use a scenario that I’ve seen on the show as an example: At one point in the game, the contestant can either walk away with 50 grand, guaranteed, or take a shot at a 1/4 chance of winning 300 grand. If the odds are against the contestant’s favour, he will end up with up losing that 50 grand (a possibility of 3/4), and walk away with nothing. Unfortunately, fortune usually does not favour the bold—the constant takes the risk, fails, and ends up with nothing.  As the audience, we think rationally, and we know that we would choose otherwise. But what is it that makes those contestants ‘irrational’?

This leads to my question: to what extent do emotion and intuition play a role in people’s decision-making?

The difference between the contestant and the audience’s (my) choices illustrates two different systems of reasoning that can explain human rationality (the processes we use for making decisions and judgments)—the former is system 1, or, the automatic system, and the latter is system 2, also known as the reflective system. Since the contestant is under immense pressure and excitement, he is going to make a fast and intuitive decision that relies heavily on emotion, as emotion is a form of evaluation in heat and urgency. Intuition and faith also play a role in this gamble—the contestant’s gut feeling tells him that he could beat the odds and win that 300 grand—even if there’s only a 1/4 chance. Although intuition is irrational, it is a source of power that allows people to make judgments in emergencies.

On the other hand, we, the audience, tend to use system 2 reasoning when we evaluate this situation on television. Because we are not confronted with such a dilemma first-hand, we are deductive in our reasoning. The reflective system of reasoning is controlled and ‘rule-following’, and it is often associated with the classical model of judgment—a form of judgement that relies solely on reason. The audience understands the risks and knows that it is unlikely for the contestant to win 300 grand, hence it’s definitely not wise to risk losing the 50 grand already earned.

However, in real life, people don’t follow the classical model of judgment; instead, we tend to go with the social intuitionist one. This model shows that we make decisions based on not only reason, but also imagination, sense perception, intuition, and emotion. We care more about what ‘feels right’, especially when we’re confronted with an emergency. This explains many other phenomena that we see in daily life: gambling, jumping into a collapsing building to save our loved ones, etc.

But despite how the game show contestants usually let emotion and faith interfere with their rational thinking, there are some who chooses not to gamble and take what they’ve already got. This shows another side of system 1 reasoning—heuristics—or ‘rules of thumb’. Studies show that people tend to be ‘risk-averse’ when they are confronted with a gain and ‘risk-embracing’ when they may face a loss. Since the game show is obviously a ‘gain’, it’s reasonable that a contestant would choose to avoid the 3/4 probability of losing all they’ve got and just walk out with 50 grand.


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