A few key decision-making skills include: System 1 relies on heuristics and intuition, while System 2 involves conscious reasoning and analysis (Gawronski & Creighton 2013).ĭecision-making skills are the abilities that help you make effective and informed decisions (Lee, 2007). The dual-process theory says that decision-making involves two cognitive systems: the intuitive, automatic system (System 1) and the deliberate, analytical system (System 2). It suggests that we are more risk-averse when faced with gains and more risk-seeking when faced with losses (Edwards, 1996). Prospect theory posits that decision-making is influenced by psychological biases and the way options are framed. Because of factors like cognitive limitations and time constraints, we have to rely on heuristics (mental shortcuts) and satisficing (selecting a solution that is satisfactory rather than optimal) instead of exhaustive analysis (Simon, 1990). The bounded rationality theory says that we are limited in our ability to process and analyze information. In this model, individuals rely on facts, analysis, and a step-by-step procedure to come to a decision (Uzonwanne, 2016). The rational decision-making model assumes that decision-makers seek to arrive at optimal decisions for their goals and values through reason and critical thinking.
Let’s take a close look at each of these theories.
Some examples of decision-making theories include the Rational Decision-Making Model, Bounded Rationality Theory, Prospect Theory, and Dual-Process Theory. These theories are all rooted in the principles and algorithms we can use to identify values, consider risks, and work with uncertainties to arrive at an optimal choice (Ahmed & Omotunde, 2012). There are many theories of decision-making.
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