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One of the reason why decision making is often difficult is that we live in a world full of uncertainness and our judgement is more and more often based on ambiguous or uncertain information. A rational approach to decision making therefore requires un assessment of risk and probability of outcome. Examples of decisions involving risk can be drawn from different areas of human activities including healthcare, international security, financial markets and environmental issues. In this paper we will discuss some of the psychological challenges we face when trying to deal rationally with probability and risk. At the basis of dealing with risk is the assessment of the likelihood of specific outcomes or, in other words, the calculation of probability. Several studies have been conducted to analyse how efficient we are in assessing probabilities under different conditions. Results of these studies have highlighted that we consistently tend to make certain type of errors when judging probabilities. Tversky and Kanhnmen have conducted a series of experiments aimed to measure our capability of assessing probabilities and have concluded that decision makers often “assess the frequency of a class or the probability of an event by the ease with which instances or occurrence can be brought to mind” (1974, cited in Plous, The psychology of judgement and decision making, page 121). In other words, when estimating the frequency of certain situations we tend to use a rule of thumb or availability heuristic based on how quickly and easily we can recall these events from log term memory. Certain situations, either because we have been more exposed to them and therefore are more easy to imagine or because they have a stronger emotional impact on us, appear to be more frequent to us. For example when asked to judge if, in the United States, people are more likely to be killed by falling airplane parts or by a shark, most people answer that sharks are a more frequent cause of death that falling airplane parts (Plous, S.1993,The psychology of judgement and decision making, page 122).
Approximate Word count = 1159
Approximate Pages = 4.6
(250 words per page double spaced)
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