Decision-making systems


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Two systems - behavioural economics

Decision making systems

Following the lead of Nobel Prize winner, Daniel Kahneman, behavioural theorists often use the two systems model to explain how decisions are routinely made.

System 1

System 1 is automatic and uses short-cuts to make quick decisions, often based on common sense estimates and emotional reactions to choice.

System 2

System 2 is a more deliberate decision making process, using conscious thinking an reflection. System 2 is much slower than System 1, and hence, in situations where a quick decision is required, System 1 is often the dominant system. While System 1 is often more convenient, it is subject to biases and errors which can lead to irrational decision making. System 2 is, however, more easily manipulated - perhaps towards decision making that is harmful to individual consumers, and to third parties.

Go to: Bounded rationality and self control

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