Heuristics Tutorial PDF

1 HEURISTICS DMSN Teams 1  Iceberg of Symptom and Real Problem “A problem clearly defined is a half a problem solved”……. Charles Kettering, GE Reactive (mindless) Symptom Creative...

1 HEURISTICS DMSN Teams 1  Iceberg of Symptom and Real Problem “A problem clearly defined is a half a problem solved”……. Charles Kettering, GE Reactive (mindless) Symptom Creative (mindful) Real Problem In a More Complex Rational Choice (Bounded Rationality) The set of choices (alternatives) need not be small : with help of computer we can handle it The information and insight needed to predict the consequences of each option need not immediately known or available: By simulating models we can predict the consequences, by involving statistics, forecasting methods, and computer simulation. Expected utility may be used as a measure of consequence value (by objective or subjective probability) The decision criterion applied need not be a simple single dimension : a multi-criteria choice could be made. 10 11 CLOSING GAP BETWEEN ACTUAL AND IDEAL Rational/Ideal/Normative Actual/Descriptive Decision Making GAP Decision Making Assumptions (Ideal): Intuition 1. Perfectly define the problem Prescriptive (Tools) 2. Identify all criteria Creative Decision Making Biases 3. Accurately weigh all criteria according to their preference Guidances to be more 4. Know all relevant alternatives rational 5. Accurately assess each Mistakes alternative based on each criterion Minimizing biases and mistakes 6. Accurately calculate and choose the alternative with the highest perceived value HEURISTICS Optimal Need to Not optimal Close to solution Improve solution 11 18 What is Heuristics? A 'heuristic is a method to help solve a problem, commonly informal. It is particularly used for a method that often rapidly leads to a solution. Heuristics are "rules of thumb", educated guesses, intuitive judgments or simply common sense. It is a shortcut to solving a problem when you’re too lazy or overwhelmed or otherwise unable to solve it the proper way. 18 19 Condition when you need to do Heuristics 1. NOT all relevant alternatives, consequences, and probabilities are known 2. Have to make a quick decision 3. The consequences are NOT severe 4. NOT need to defend your decision to others 5. etc Simple Heuristics that Makes Us Smart – Gerd Gigerenzer Max Planck Institute for Human Development Berlin  Heuristic Approaches to Multiple 20 Alternatives 1 2 3 4 5 6 7 Chapter 2 of Goodwin & Wright (2014) 20 21 01 Recognition Which city has more inhabitant: A. Bogor City Heuristics B. Grobogan Regency example 22 Usually DM (decision makers) use the recognition heuristics to make decision. If one is recognized and the other is not, the recognized option is chosen. 23 You’ve been selected as SBM representation 02 of Youth Program Asia-Pacific to Iceland. Alternatives of airline to go to Iceland : 1. Air France Minimalist 2. Iceland Air Strategy 3. British Airways example 4. Qatar Airways 5. Garuda Indonesia 6. Singapore Airlines 7. China Southern Which airline will you choose? Explain why?  Minimalist Strategy 02 Minimalist In this heuristic the decision maker first applies the recognition heuristic, but if neither option is recognized the person will simply guess which is the best option. In the event of both options being recognized then the Strategy person will pick at random one of the attributes of the example two options. If this attribute enables the person to discriminate between the two options they will make the decision at this point. If not, then they will pick a second attribute at random, and so on. 24  Example 03 Take the Last What food do you choose using Gofood? 25 26 03 Take the Last ◈ Same as minimalist heuristic except that people use the attribute that enabled them to choose last time when they had a similar choice. ◈ If both options are equally good on this attribute, choose the attribute that worked the time before, and so on. ◈ If none of the previously used attributes works, a random attribute will be tried. 27 04 Which Brand do you choose? Brand Price Quality Lexicographic A $ 3.00 low Strategy example B $ 3.60 high C $ 3.40 medium D $ 3.00 medium 28 04 If the price is more important attribute, then under lexicographic strategy choose Brand D since brand A and D is tie in price 3 but brand D is better in quality. Lexicographic Strategy Brand Price Quality example A $ 3.00 low B $ 3.60 high C $ 3.40 medium D $ 3.00 medium 29 04 Lexicographic ◈ Used where attributes can be ranked in order of importance. ◈ Involves identifying most important attribute and selecting the option which is best on that attribute Strategy (e.g. choose cheapest option). ◈ In there’s a ‘tie’ on the most important attribute, choose the option which performs best on the 2nd most important attribute, and so on. 30 If the price difference between brands is less than 05 50 cents choose the higher quality product, otherwise choose the cheaper brand. Brand Price Quality Semi- Lexicographic A $ 3.00 low Strategy B $ 3.60 high example C $ 3.40 medium Which Brand do you choose? 31 05 Semi- ◈ Like the lexicographic strategy - except if options have similar performance on an attribute they are considered to be tied. Lexicographic ◈ It can lead to violation of transitivity axiom… Strategy 32 If the price difference between brands is less than 05 50 cents choose the higher quality product, otherwise choose the cheaper brand. Brand Price Quality Semi- Lexicographic A $ 3.00 low Strategy B $ 3.60 high example C $ 3.40 medium A vs B the price difference is more than 50 cent → chose A. A vs C the price difference is less than 50 cent → chose C since C has higher Quality. 33 06 ◈ Price is more important attribute and the cut off point of price is $3.50. ◈ The cut off point for Quality is medium. Elimination Brand Price Quality by Aspect A $ 3.00 low (EBA) example B $ 3.60 high C $ 3.40 medium Which brand do you choose? 34 06 Elimination ◈ Most important attribute is identified and a performance cut-off point is established. ◈ Any alternative falling below this point is eliminated. by Aspect (EBA) ◈ The process continues with 2nd most important attribute, and so on. 35 06 ◈ Price is more important attribute and the cut off point of price is $3.50. ◈ The cut off point for Quality is medium. Elimination Brand Price Quality by Aspect A $ 3.00 low (EBA) example B $ 3.60 high C $ 3.40 medium Eliminate B since its price higher than $3.50. Eliminate A since its quality is low. 36 06 Elimination ◈ Easy to apply. ◈ Involves no complicated computations. ◈ Easy to explain and justify to others. by Aspect (EBA) ◈ Fails to ensure that the alternatives retained Strength & are superior to those which are eliminated - Limitation this arises because the strategy is non- compensatory. 37 07 Satisficing example 38 07 Satisficing ◈ Alternative chosen sequentially. ◈ Aspiration have been set previously, and the search process stops when an alternative is fulfilled the aspiration. Selama solusi yang memenuhi kriteria sudah ditemukan, solusi terbaik gak akan dicari. 39 [Briefly outline your exercise instruction] Let’s Practice! 39 40 Case Description After her examinations, a student decides that she needs a holiday. A travel agent supplies the following list of last minute holidays that are available. Duratio Walking time to Destination Cost Self-catering? n beach Canada 7 days $850 No 2 minutes Barbados 10 days $1200 No 4 minutes Canary Isles 14 days $2000 No 10 minutes Greece 10 days $1100 Yes 2 minutes Spain 10 days $1000 Yes 5 minutes Turkey 14 days $1000 No 1 minute California 10 days $850 Yes 1 minute Florida 10 days $1800 No 30 minutes Mexico 14 days $1500 No 8 minutes 40 41 Case Instructions Use the previous information to demonstrate how the student could apply each of the following strategies to determine which holiday she will choose from the list provided by the travel agent and discuss the advantage and limitations of using each strategy. Lexicographic Semi-lexicographic Satisficing Elimination by aspects 41 42 Additional Information Importance Level Criteria Cut-off Cost The holiday must Cost (≤$1500) Walking time to the beach last at least 10 Walking time to the beach Duration days (≤ 5 minutes) It must cost no Duration (≥ 10 days) Self-catering more than $1500 Self-catering (No) It must not be self- catering Assumption It must be located She will consider in accommodation, additional cost of $150 which is no more from the cheapest than 5 minutes’ package to get a better walk from the alternative. beach. 42 43 Let’s Discuss the Results! 43 44 ▸ Importance Level 01 ▹ Cost ▹ Walking time to the beach ▹ Duration ▹ Self-catering Duratio Walking time to Destination Cost Self-catering? Discussion n beach Lexicographic Canada 7 days $850 No 2 minutes Strategy Barbados 10 days $1200 No 4 minutes Canary Isles 14 days $2000 No 10 minutes Greece 10 days $1100 Yes 2 minutes Spain 10 days $1000 Yes 5 minutes Turkey 14 days $1000 No 1 minute California 10 days $850 Yes 1 minute Florida 10 days $1800 No 30 minutes Mexico 14 days $1500 No 8 minutes 45 ▸ Assumption 02 ▹ She will consider additional cost of $150 from the cheapest package to get a better alternative. Duratio Walking time to Destination Cost Self-catering? Discussion n beach Semi- Canada 7 days $850 No 2 minutes Lexicographic Barbados 10 days $1200 No 4 minutes Strategy Canary Isles 14 days $2000 No 10 minutes Greece 10 days $1100 Yes 2 minutes Spain 10 days $1000 Yes 5 minutes Turkey 14 days $1000 No 1 minute California 10 days $850 Yes 1 minute Florida 10 days $1800 No 30 minutes Mexico 14 days $1500 No 8 minutes 46 ▸ Cut-off ▹ Cost (< $1500) 03 ▹ Walking time to the beach (≤ 5 minutes) ▹ Duration (≥ 10 days) ▹ Self-catering (No) Duratio Walking time to Destination Cost Self-catering? Discussion n beach Elimination by Canada 7 days $850 No 2 minutes aspects Barbados 10 days $1200 No 4 minutes Canary Isles 14 days $2000 No 10 minutes Greece 10 days $1100 Yes 2 minutes Spain 10 days $1000 Yes 5 minutes Turkey 14 days $1000 No 1 minute California 10 days $850 Yes 1 minute Florida 10 days $1800 No 30 minutes Mexico 14 days $1500 No 8 minutes 47 ▸ Criteria ▹ Duration ≥ 10 days 04 ▹ Cost < $1500 ▹ It must not be self-catering ▹ Walking time to the beach (≤ 5 minutes) Duratio Walking time to Destination Cost Self-catering? Discussion n beach Satisficing Canada 7 days $850 No 2 minutes Barbados 10 days $1200 No 4 minutes Canary Isles 14 days $2000 No 10 minutes Greece 10 days $1100 Yes 2 minutes Spain 10 days $1000 Yes 5 minutes Turkey 14 days $1000 No 1 minute California 10 days $850 Yes 1 minute Florida 10 days $1800 No 30 minutes Mexico 14 days $1500 No 8 minutes  Agenda 05 Decision Making Model 49 04 Decision Making Model using Problem Solving Framework Copyright © 2011 Cengage Learning. All rights reserved. 50 50