Problems in Decision-Making

Decision-making problems can be common
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Each and every day we are faced with a multitude of decisions. Some of these are relatively small, such as deciding what to wear or what to have for breakfast. Others are big and can have a major influence on the course of our life, such as deciding where to go to school or whether to have children. Some decisions take time while others must be made in a split-second. While we employ a number of different decision-making strategies, we also often fall prey to a number of common fallacies, biases, and other decision-making problems.

Discover which decision-making mistakes and obstacles might be influencing the choices you make each and every day.

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Decision-making problems are often the result of relying too heavily on mental shortcuts that have worked in the past. A heuristic is a sort of mental shortcut or rule of thumb that we utilize when making a judgment or decision. These heuristics help to lighten the mental load when we make choices, but they can also lead to errors.

Heuristics come with a couple of major advantages. First, they allow us to reach conclusions quickly. Second, heuristics also tend to work quite frequently. But as with all kinds of shortcuts, they can sometimes have disadvantages. They can sometimes lead us to make mistakes and misjudge situations.

Two common types of mental shortcuts are:

  • The Representativeness Heuristic: This involves judging the probability of an event based upon how similar it is to our existing prototype of such an event. For example, gamblers often judge the probability that they will win their next game based on whether or not they won the last game. In reality, the games are not dependent upon each other and winning or losing is entirely up to chance.
  • The Availability Heuristic: This involves judging the likelihood of an event based upon how quickly we can call similar events to mind. For example, you might believe that plane crashes are more common than they really are simply because you can quickly think of several examples of high profile airplane accidents.


Another problem that can impact decision-making is our tendency to overestimate our own knowledge, skill, or judgment. In a classic experiment looking at this phenomenon, researchers Baruch Fischhoff, Paul Slovic, and Sarah Lichtenstein gave participants a variety of statements that had two different answers. Participants were asked to select the answer they believed was correct and then rate how confident they were in their answers. When people stated that they were 100% confident in their answers, they were only correct about 80% of the time.

So why do people tend to be overconfident in their judgments?

  • In a lot of cases, people might not realize how uninformed they are about a particular subject. Essentially, we don't know what we don't know.
  • In other cases, the information we have about a particular topic might simply be wrong or it might come from unreliable sources.

One example of this overconfidence is a type of cognitive bias known as the Dunning-Kruger effect. This bias causes people to overestimate their own intelligence and abilities, essentially blinding them to their own incompetence.

No matter what the cause, this tendency to overestimate our own knowledge can lead to poor decisions. Imagine that you are traveling to Las Vegas with a friend. You've been there a couple of times before so you assume that you know the route you should take and you instruct your friend to take a particular exit that you believe is the correct one. Unfortunately, you misremembered the route and the exit turns out to be the wrong one. Your overconfidence in your ability to navigate the route led to the wrong choice and added considerable time on to your journey.

Hindsight Bias

After something has happened, do you ever look back on the event and feel like you should have known what the outcome would be? In psychology, this tendency to look back retrospectively and easily spot all the signs leading up to a particular outcome is known as the hindsight bias. Sometimes referred to as the "I-knew-it-all-along" phenomenon, this tendency can lead us to believe that we can actually predict consequences in situations that are really dependent upon chance.

For example, a gambler might mistakenly believe that they can accurately predict the outcome of a game of cards. In reality, there is no way that he can know what will happen since the game is based upon probability.

The hindsight bias can cause problems when it leads you to believe that you should have been able to foresee the outcome of situations that really weren't that predictable. As a result, you might make future decisions based on the information you learned from past mistakes. Rather than relying on factors related to the present situation, you might find yourself trying to guess the outcome based upon other, possibly unrelated experiences.

Illusory Correlation

When making decisions, we sometimes see relationships that do not really exist. For example, we might believe that two unrelated events have some type of relationship simply because they occurred around the same time. In other cases, a one-time association between two different variables might lead us to assume that the two are somehow connected. For example, if you have a bad experience with a rude waitress, you might mistakenly believe that all waitresses are rude.

This tendency to see relationships where none exist is known in psychology as an illusory correlation. In addition to leading to faulty beliefs, illusory correlations can also cause problems in the decision-making process. For example, imagine that you are interested in getting a new pet but you are not sure which type of pet you might want. A bad childhood experience with a dog might lead you to hold the mistaken belief that all dogs are aggressive and tend to bite. This can influence you as you make your choices about which pet to get, and might lead you to reject getting a puppy even though a dog would likely make a great pet for you.

A Word From Verywell

While we all like to believe that we make our choices based on logic and rationality, the fact is that there are a number of decision-making problems that can complicate this process. Being aware of some of these potential pitfalls might help you make better decisions in the future.

7 Sources
Verywell Mind uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
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  2. Walker AC, Stange M, Fugelsang JA, Koehler DJ, Dixon MJ. Unclaimed prize information biases perceptions of winning in scratch card gambling. J Gambl Stud. 2018;34(4):1355-1375. doi:10.1007/s10899-018-9770-2

  3. Fischhoff B, Slovic P, Lichtenstein S. Knowing with certainty: the appropriateness of extreme confidenceJ Exp Psych Human. 1977;3(4):552–564. doi:10.1037/0096-1523.3.4.552

  4. Serra MJ, Demarree KG. Unskilled and unaware in the classroom: college students' desired grades predict their biased grade predictions. Mem Cognit. 2016;44(7):1127-37. doi:10.3758/s13421-016-0624-9

  5. Dunning D. 2011. The Dunning‐Kruger effect: on being ignorant of one's own ignoranceAdv Exp Soc Psychol. 2011;44: 249– 94. doi:10.1016/B978-0-12-385522-0.00005-6

  6. Groß J, Pachur T. Age differences in hindsight bias: A meta-analysis. Psychol Aging. 2019;34(2):294-310. doi:10.1037/pag0000329

  7. Weigl M, Mecklinger A, Rosburg T. Illusory correlations despite equated category frequencies: A test of the information loss account. Conscious Cogn. 2018;63:11-28. doi:10.1016/j.concog.2018.06.002

Additional Reading
  • Bazerman MH. Judgment and decision making. In Biswas-Diener, R, Diener E, eds. Noba Textbook Series: Psychology. Champaign, IL: DEF Publishers; 2018.

By Kendra Cherry
Kendra Cherry, MS, is the author of the "Everything Psychology Book (2nd Edition)" and has written thousands of articles on diverse psychology topics. Kendra holds a Master of Science degree in education from Boise State University with a primary research interest in educational psychology and a Bachelor of Science in psychology from Idaho State University with additional coursework in substance use and case management.