Chapter 12 Flashcards
What are the 6 steps to make a rational decision?
1-define the problem 2- identify the criteria 3- allot are weights to the criteria 4- develop alternatives 5- evaluate the alternatives 6- select the best alternative
What are the assumptions made by the rational decision making model?
- Problem clarity: The problem is clear and unambiguous
- Known options: The decision maker can identify all relevant criteria and viable alternatives
- Clear preferences: The criteria and alternatives can be ranked and weighted
- Constant preferences: Specific decision criteria are constant and the weights assigned to them are stable over time.
- No time or cost constraints: Full information is available because there are no time or cost constraints.
- Maximum payoff: The choice alternative will yield the highest perceived value.
How do people actually make decisions?
- bounded rationality : Limitations on one’s ability to interpret, process, and act on information
- satisficing: identifying a solution that is “good enough “. The first acceptable option rather than the optimal one ( hiring decisions, job search, spouse, group decisions
- intuition: A non-conscious process created from distilled experience that results in quick decisions. Relies on holistic associations. Affectively charged – engaging the emotions
- judgement shortcuts
- over confidence bias, anchoring bias, confirmation bias, escalation of commitment, risk aversion
T/F: people ofrenda make decisiones bases ok perceptions (not fact)
true
What do we often do when we make decisions?
- take shortcuts
- have biases
What are the judgement shortcuts and explain
Overconfidence bias:
Believing too much in our own ability to make good decisions – especially when outside of own expertise. The weaker the ability, the more likely to overestimate performance/ability
Anchoring Bias:
Using early, first received information as the basis for making subsequent judgments. Talked about this in “negotiations”
Confirmation Bias
Selecting and using only facts that support our decision. Ex. Journalism, Hiring/promotion, in science
Availability Bias:
Emphasizing information that is most readily at hand. Recent & Vivid. Ex Risk of death, Airplane crashes (1/11 million), Shark attack (1/3.7 million), Car crashes (1/500), Getting stabbed from Kijiji?
Escalation of Commitment
Increasing commitment to a decision in spite ofevidence that it is wrong – especially if responsible for the decision! (Dollar Auction)
The more “rational” the decision the more irrational commitment
Risk Aversion
The tendency to prefer a sure gain over a risker outcome. Will take $50 rather than a 50/50 chance for $100. People prefer to take chances to prevent a negative outcome. Will take a 50/50 chance on losing $100 rather than pay $50
What are the four approaches to ethical reasoning?
End-result ethics
The rightness of an action is determined by evaluating its consequences.
e.g. Everyone made a hefty profit, so the action is ok
Duty ethics
The rightness of an action is determined by one’s obligation to adhere to consistent principles, laws and social standards that define what is right and wrong
e.g. I would not lie because lying is wrong
Social contract ethics
The rightness of an action is based on the customs and norms of a particular society or community
e.g. All agents tell “white lies” to get the deal done – it is perfectly acceptable for me to do this as well
Personalistic ethics
The rightness of the action is based on one’s own conscience and moral standards
e.g. I personally believe that it is ok to inflate an opening offer to get the highest price
What is deception by omission/commission?
Omission – failing to disclose information that would benefit the other person
Don’t mention the defective transmission when selling your car
Commission – actually lying about the issues
Telling the buyer that the transmission is working well
Far more people are willing to lie by omission!
Buyer beware!
Onus is on the buyer to ask questions/ be diligent
What are the 3 factors affecting ethical decision-making behaviour?
- stage of moral development
- locus of control
- org environment
What are the 3 stages of moral development?
Preconventional
- Follow rules
- Try to avoid punishment
Conventional
- Social norms
- Obey laws for society
Postconventional
- Ethical principles (golden rule)
- Rights, regardless of what the majority thinks
Side note: Key Findings
Most people are operating at the conventional stage
Highly influenced by peers & organizational rules
Women are consistently lower than men!
Utilitarian Criterion – Outcomes “what is the greatest good”
Care Criterion – Protect relationships with others
Question basic assumptions of research!
A meta-analysis by Ford & Richardson (1994)
- No differences between the sexes. Well, maybe women are a bit more ethical
- No differences between faculties
- Older individuals with more work experience are more ethical
What Locus of Control and Org Environment
External locus of control – believe that outside forces (luck/chance) control one’s life. Less likely to take responsibility for their behavior
Organizational Environment
Does an organization reward or discourage unethical behavior? More ethical cultures tend to have more ethical employees. What they actually do, not what they say they do.
What are the 3 questions you should ask to see if something is ethical? + Red face test
1- is the decision motivated by self serving interests?
2-does the decision respect the rights of the individuals affected?
3- is the decision fair and equitable?
Red Face Test – Would you be embarrassed/uncomfortable if your actions were printed on the front page?
What is “rational” decision making?
Makes consistent, value maximizing choices within specified constraints
