According to Herbert A. Simon's theory of decision-making, several key psychological factors influence how individuals make choices, particularly under conditions of uncertainty and risk. Here are the main factors:
Simon introduced the concept of bounded rationality, which suggests that individuals do not possess the capacity to evaluate every possible option due to cognitive limitations and the constraints of available information. Instead of seeking the optimal solution, people often settle for a satisfactory one that meets their needs, a process known as "satisficing." This means that decision-makers aim for a solution that is "good enough" rather than the best possible outcome [2].
Cognitive biases play a significant role in decision-making. These biases can distort perception and judgment, leading individuals to rely on heuristics—mental shortcuts that simplify decision processes. For example, biases such as confirmation bias (favoring information that confirms existing beliefs) or availability bias (relying on immediate examples that come to mind) can significantly influence choices and lead to suboptimal outcomes [1].
Individuals often draw on past experiences when making decisions. Positive outcomes from previous choices can lead to a tendency to replicate those decisions in similar situations, while negative experiences may cause individuals to avoid certain options. This reliance on historical context can shape future decision-making but may not always lead to the best choices if past situations do not accurately reflect current circumstances [1].
Simon’s theory also highlights the phenomenon of escalation of commitment, where individuals continue to invest time, money, or resources into a failing course of action due to their emotional attachment or previous investments. This irrational commitment can cloud judgment and prevent individuals from recognizing when it is time to change direction [1].
Factors such as age, socioeconomic status, and cognitive abilities can influence decision-making processes. Research indicates that older adults may exhibit different decision-making patterns compared to younger individuals, often preferring fewer choices and being more overconfident in their abilities [1]. Socioeconomic status can also affect access to information and resources, impacting the quality of decisions made.
The belief in personal relevance significantly affects decision-making. When individuals perceive that their decisions matter or have an impact on outcomes, they are more likely to engage in the decision-making process actively. This sense of personal importance can motivate individuals to invest more effort into making informed choices [1].
Simon's theory emphasizes that decision-making is not purely a rational process but is heavily influenced by psychological factors such as bounded rationality, cognitive biases, past experiences, escalation of commitment, individual differences, and personal relevance. Understanding these influences can help improve decision-making strategies by acknowledging human limitations and enhancing awareness of potential biases.