Bounded rationality and interaction design

For the first time ever (as far as I know) the Nobel Prize in Economics has been awarded to a Cognitive Psychologist. The work of Daniel Kahneman on how people make decisions has had a major impact on both Economics and Psychology. A graduate course I took on decision-making mostly focused on his work and its critiques. Through a series of innovative experiments, Kahneman & Tversky investigated how people deviate from “rational decision making” using heuristics (short cuts) to make their decisions: (a) people pay attention to some relevant information and ignore other information; (b) are affected by framing (how the information was presented); (c)judge relationships between presented information incorrectly; and (d)ignore base-rates (probability of event happening). (a good book for non psychologists to explore this area is “The Psychology of Judgment & Decision Making“)

Why is this relevant to the design of interactive systems? Many interfaces we create support human decision-making. And a good system should take into account how human beings make decisions. For example, Collaborative Filtering Systems (e.g., Amazon type recommendation system) are typically suited to the idiosyncrasies of human decision-making (though they have nothing to do with Kahneman’s insights). People are used to relying word of mouth, to social filtering of information. And Collaborative Filtering algorithms use this same characteristic to create a new paradigm for finding information online.

I believe that as interfaces continue to evolve one of the major developments will be incorporating an understanding of how people make decisions. This will happen as researchers in Universities launch programs for understanding how bounded rationality helps explain online decision making. Academic research will mostly involve lab-based experiments (in Business Schools, Behavioral Economics and Cognitive Psychology Departments), but will also be aided by server log analysis. Results of such research will ultimately permeate the HCI community and influence the design of ecommerce systems, search interfaces and online auctions etc. (Every once in a while I feel tempted to do such research myself!)

In the meantime here are some links about current research on online decision-making found after some quick googling:
(a) Conference on Online Consumer Psychology
(b) A paper on Consumer Decision Making in Online Environments (pdf)

(c) BOunded Rationality and Satisficing in web-based decisions (JASIST paper)
(d) Emotions in Decision Making (recent research has explored this role)

(Note: CogPrints and is a good sources for online articles on Psychology and Cognitive Science.)