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Psychology for Decision Making

In "Decision Making" books, Data science is introduced as useful tool. But the process to make decision in our mind is not introduced in many cases.

Psychology is important to understand the process to make decision. And it is also useful to use data science deeply.

Mathematical Model with Subjectivity

In Bayesian Statistics , prior probability is used. It is also called subjective probability. There is a way to calculate expectation with subjective probability

And in expected utility theory, we use subjectivity (value). And then we can use deeper subjectivity with prospect theory.

These mathematical models are constructed by statistical decision making and psychology.

Bounded Rationality (Satisfying Solution)

In the case that "The condition is changing.", "Infomation is limited." and "There is not enough time to consider." , Decision Making is not rationality but bounded rationality.

In this case, we need more satisfaction to make decision. So solution of this case is called "Satisfying Solution".

Decision making in the real world not done only with data and mathematics. It relies also on the Cognitive Psychology .