Heuristics in multi-criteria decision-making: The cost of fast and frugal decisions

Abstract

There has been an ongoing debate in research regarding the use of heuristics in decision-making. Advocators have succeeded in showing that applying heuristics not only reduces effort but can even be more accurate than analytical approaches under certain conditions. Others point out the biases and cognitive distortions inherent in disregarding information. Researchers have used both simulations and experiments to study how the use of heuristics affects the decision's outcome. However, a good decision is determined by the process and not a lucky outcome. It is a conscious reflection on the decision-maker's information and preferences. Therefore, a heuristic must be assessed by its ability to match a structured decision processing all available information. Thus, the question remains: how often does the reduction of information considered in heuristic decisions lead to a different recommended alternative? We applied different heuristics to a dataset of 945 real, personal decisions. We have found that by using heuristics instead of a fully developed decision structure, in 60.34% of cases, a different alternative would have been recommended to the decision-maker leading to a mean relative utility loss for the deviating decisions of 34.58%. This shows that a continuous effort to reflect on the weighing of objectives and alternatives leads to better decisions.