Back to Dialogue

Cognition Corner – Choosing Wisely

The human mind is riddled with quirks that can skew judgement and perception, regardless of where you stand on the corporate ladder. In fact, there are several contextual effects that can unreasonably impact the choices you make. Trying to limit these biases can help you make more intelligent and informed decisions.

In context
When looking to make a decision or purchase where there is one variable that’s most important (such as cost), it’s best to determine the budget and functional requirements before you examine the options. The Compromise Effect is a quirk in psychology that makes people gravitate towards the middle option, because it feels like a “compromise” between being cheap and being extravagant. As an example, when looking for a software solution, companies given options ranging from $700 to $1000 tend to choose packages in the $800-900 range. However, if a $1300 package is added in, they will suddenly gravitate towards the $1000-$1100 selections.

There’s also something called the Decoy Effect, where the presence of certain options influences the probability of people selecting other options. As an example, when presented with chocolate and vanilla ice cream, a person may select vanilla. However, when presented with chocolate, vanilla, and maple ice cream, that same person may select chocolate. The maple is a “decoy” that influences the choice. It seems unintuitive and illogical (and it is), but the effect is very real. Try this exercise:

Which hotel would you recommend for an off-site leadership conference?

Hotel A Hotel B
Stars 3.5 4.5
Price/Room $200 $275

Figure 1: An interesting decision

It seems like there are arguments for either side. It depends on what you value more: luxury or affordability. Now examine the table below, and try to see it through fresh eyes:

Hotel A Hotel B Hotel C
Stars 3.5 4 4.5
Price/Room $200 $300 $275

Figure 2: A simple choice?

Does it feel easier now? Most people quickly judge Hotel C to be the best choice. However, they are making the same decision as in Figure 1, except that a clearly inferior “decoy” option has been added. This cognitive error can plague all sorts of decisions.

Finally, there is a psychological effect called Distinction Bias, which explains people’s tendency to overemphasize the differences between things when they are presented together. This may lead to spending more on something that feels very distinct in the moment, but is actually very similar in the context of how it will be used. Think about how much more appealing a 3D-enabled TV can seem compared to a “regular” one, even though you may only use the 3D feature 10% of the time.

Putting it into practice
So what does all of this mean? It means that when you have to make a decision, you should determine your needs (performance, budget, etc.) before you begin examining the available options. Then, study each option carefully, and don’t compare more than two items at once.

Follow these simple rules and you’ll make more rational choices that align with your actual goals and needs. Remember to check this space regularly for future installments of Cognition Corner!

Share this post

Your email address will not be published. Required fields are marked *