Chapter 12 (Week 11)

Question 1

Rational Decision-Making Process

Answer 1

1. Define the problem
2. Identify the criteria
3. Allocate weights to the criteria
4. Develop alternatives
5. Evaluate the alternatives
6. Select the best alternative

Question 2

Bounded Rationality

Answer 2

Limitations on person’s ability to interpret, process and act on the information

Question 3

Satisficing

Answer 3

provide a solution that is both satisfactory and sufficient (good enough)

Question 4

Intuitive Decision Making

Answer 4

unconscious process created out of a person’s many experiences

Question 5

Biases or Judgment Shortcuts

Answer 5

Overconfidence Bias - error in judgment arising from being far too optimistic about one’s own performance

Anchoring Bias - tendency to fixate on initial information, from which one then fails to adequately adjust for subsequent information

Confirmation Bias - tendency to seek out information that reaffirms past choices and to discount information that contradicts past judgment

Availability Bias - tendency for people to base their judgments on information that is readily available to them rather than complete data

Escalation of Commitment - increased commitment to a previous decision despite negative information

Randomness Error - tendency of individuals to believe that they can predict the outcome of random events

Risk Aversion - tendency to prefer a sure gain of a moderate amount over a riskier outcome, even if the riskier outcome might have a higher expected payoff

Hindsight Bias - tendency to believe falsely, after an outcome of an event is known, that one could have accurately predicted that outcome

Question 6

Groupthink

Answer 6

Phenomenon in which group pressures for conformity prevent the group from critically appraising unusual, minority, or unpopular views

Symptoms of Groupthink:
- Illusion of invulnerability
- Assumption of morality
- Rationalized resistance
- Peer pressure
- Minimized doubts
- Illusion of unanimity

Minimize Groupthink:
- Monitor group size (try to keep to less than 10)
- Encourage group leaders to play an impartial role
- appoint one group member to play the role of devil’s advocate
- stimulate active discussion of diverse alternatives to encourage disseneting views and more objective evaluations

Question 7

Group Decision Making Techniques

Answer 7

Interacting Groups - members interact with one another face to face

Brainstorming - idea-generation process that specifically encourages all alternatives, while withholding any criticism of those alternatives

Nominal Group Technique - individual members meet face to face to pool their judgments in a systematic but independent fashion (e.g. everyone writes their ideas down, everyone presents one idea, group discusses and evaluates ideas, everyone silently ranks ideas for final decision)

Question 8

Ethics in Decision Making

Answer 8

Four criteria:

Utilitarianism - decision focused on outcomes or consequences that emphasize greatest good for greatest number; promotes efficiency and productivity but can sideline rights of individuals with minority representation

Whistle-blowers - individuals who report unethical practices by their employer to outsiders; rights protects individuals but can create legalistic environment that hinders productivity and efficiency

Justice - impose and enforce rules fairly and impartially so that there is an equitable distribution of benefits and costs; protects interests of underrepresented and less powerful but can reduce risk-taking, innovation, and productivity

Care - suggests that morally correct action is the one that expresses care in protecting the special relationships that individuals have with each other