Adding vs. Averaging in Decision-Making

Hi,

When we need to choose between different available options, we usually do it by evaluating their attributes. This typically involves either averaging the value of the different attributes or adding them together.

For example, let’s say we’re on the fence about applying for a job that we’d rate as a “3” in terms of appeal on a scale of 1-5, where higher is better. Re-reading the job description, we notice an additional benefit we previously missed that we’d rate as a “2”. If we add the attributes, we’d now consider the job more attractive, because the value of that benefit is added to the total value of the job. If we average the attributes, however, we’d now consider the job less attractive despite having more benefits, because the value of this benefit is lower than the average value for the job.

In other words, seeing that mediocre benefit can paradoxically make the job feel less attractive, even if having that benefit is expected to have positive value overall, because it reduces the average perceived value of the job. And, in practice, people not only regularly use averaging in their decision-making, but also tend to default to it when it’s hard for them to evaluate the available options, for instance because they need to quickly choose between many options.

This distinction is important for understanding people’s thinking, including your own, and for influencing people’s decisions. As an example, if you’re a hiring manager, you might prioritize offering a few great benefits over many mediocre ones, and also avoid weak benefits entirely.

As always, I’m happy to hear your thoughts.

Have a great week,
Itamar