Encyclopedia of Sociology

DECISION-MAKING THEORY AND RESEARCH

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JOHN W. RILEY, JR.

DECISION-MAKING THEORY

AND RESEARCH

Decision making must be considered in any expla-

nation of individual behavior, because behaviors

are based on decisions or judgments people have

made. Thus, decision-making theory and research

is of interest in many fields that examine behavior,

including cognitive psychology (e.g., Busemeyer,

Medin, and Hastie 1995), social psychology (e.g.,

Ajzen 1996), industrial and organizational psy-

chology (e.g., Stevenson, Busemeyer, and Naylor

1990), economics (e.g., Lopes 1994), management

(e.g., Shapira 1995), and philosophy (e.g., Manktelow

and Over 1993), as well as sociology. This section

will be an overview of decision-making theory and

research. Several excellent sources of further in-

formation include: Baron (1994), Dawes (1997),

Gilovich (1993), and Hammond (1998).

DECISION-MAKING THEORIES

Most decision-making theory has been developed

in the twentieth century. The recency of this devel-

opment is surprising considering that gambling

has existed for millennia, so humans have a long

history of making judgments of probabilistic events.

Indeed, insurance, which is in effect a form of

gambling (as it involves betting on the likelihood

of an event happening, or, more often, not hap-

pening), was sold as early as the fifteenth and

sixteenth centuries. Selling insurance prior to the

development of probability theory, and in many

early cases without any statistics for, or even fre-

quencies of, the events being insured led to bank-

ruptcy for many of the first insurance sellers (for

more information about the history of probability

and decision making see Hacking 1975, 1990;

Gigerenzer et al. 1989).

Bayes’s Theorem. One of the earliest theories

about probability was Bayes’s Theorem (1764/1958).

This theorem was developed to relate the proba-

bility of one event to another; specifically, the