Abstract for: Cognitive Decision-Making Processes
Decision-making is a common aspect in system dynamics literature. The change of existing policies and decision rules is at the heart of the method and a big advantage of the modeling practice. But how is it about the decision-making process itself and the underlying behavioral assumptions? In its early stages decision theory dealt with rational models, drawing on a homo oeconomicus being confronted with optimizing problems. SIMON is one of the great critics of that approach and many researchers have adopted his findings of bounded rationality since then. The analysis at hand is dealing with behavioral problems, decision makers are facing in a dynamic and uncertain environment. The vast amount of information available in a complex and dynamic decision situation is too much for an individual to handle. Hence, decision-making activities, like information-processing and risk-taking, are influenced by unconscious processes in the mind of the decision maker. For example, simplifying heuristics and routines are known as reactions to the cognitive overload. Biases are often the consequence of such behavior. The effects of prior decisions, incomplete information, confidence in decision quality, and risk-taking behavior related to aspects of prospect theory are considered to build a model of “cognitive decision-making processes”.