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Judgment and Decision-Making Processes  

Richard P. Larrick and M. Asher Lawson

The field of judgment and decision making (JDM) arose in psychology to test the rational assumptions posed in other fields such as economics and statistics. This has led to three major contributions of the field. First, to the extent that people systematically deviate from rational models, their decisions are less than optimal. This has consequences for both business practice and for assumptions in many professional fields, such as finance, medicine, and law. Second, the deviation from rational models has led JDM researchers to identify categories of psychological processes that do guide decision making. These include associationistic memory processes, psychophysical processes, emotional processes, and learning. Third, building on the first two contributions, the field of JDM has merged rational and psychological perspectives to explore ways to improve decision making. These methods include a variety of interventions known as nudges, choice architecture, debiasing, and the use of external aids such as algorithms and the wisdom of crowds. The three contributions of JDM help researchers in a number of fields analyze problems and design helpful solutions. Workplace examples include designing better processes for hiring and evaluation, goal setting, and employee retirement savings planning.