To begin, we examine the decision process of normal human beings. Decision-making can be divided into three phases: perception, assimilation, and evaluation. The fact is that, even though people are not perfect rational beings, in reality, they do not even take the time to do the full scope of an analysis of which they are capable. First, they oversimplify. Then, they let emotional factors seep into this simplified analysis. Instead of hard analysis, most people rely on heuristics, or back-of-envelope calculations. In addition
, in what is referred to as the reduction of complexity, numbers might be rounded and small differences ignored. Next, mental accounting separates larger problems into components, which might miss the implications of the package. Interestingly, this also relates back to our discussion of framing; mental accounting means that sometimes people will miss favorable frames that are available. Watch video in link below
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A final component in the reduction of complexity is availability: people will focus on information that is readily available and look no deeper. As far as comparing it to past experience, cognitive availability will cause people to attach greater significance to things that they can relate from past experience.
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