Decision Biases Flashcards
What are programmed decisions?
repetitive and handled by routine approaches
What are non-programmed decisions?
‘customised’ in order to solve unique or non-recurring problems
What are the 6 steps to the Rational Model?
- Define the problem
- Identify the decision criteria
- Weigh the criteria
- Develop alternative courses
- Evaluate the alternatives
- Select the best alternative
What assumptions does the Rational Model make?
4
- Assumes clear preferences that can be ranked
- Assumes information about alternatives is available
- Assumes managers possess the mental facilities to process this information
- Assumes managers know what future course of action is best
Behavioural Model
What is ‘Bounded Rationality’?
Individuals make decisions by constructing simplified models that extract the essential features from problems without capturing all their complexity
Behaviour Model
What is meant when Managers satisfice and not optimise?
Individuals search for and choose acceptable, or satisfactory, responses to problems and opportunities rather than trying to make the best possible decision
Behaviour Model
What is meant when we say managers rely on heuristics?
Intuition and rules of thumb (judgemental shortcuts)
What is ‘Bunker Mentality’?
When decision makers who cut themselves off and, as a result, lose touch with reality
Cognitive Biases
What is ‘Anchoring Bias’?
The tendency to rely too heavily on the first piece of information offered when making decisions
Cognitive Biases
What is ‘Confirmation Bias’?
We seek information consistent with our belief system and we accept information uncritically unless there is an unavoidable reason not to
Cognitive Biases
What is ‘Representative Bias’?
The tendency to generalise inappropriately from a small sample or single event or episode
Cognitive Biases
What is ‘Escalating Commitment’?
The tendency to commit additional resources to a project even if evidence shows that the project is failing
What are the advantages to group decision-making?
3
- Choices less likely to fall victim to individual bias
- Able to draw on combined skills of group members
- Improve ability to generate feasible alternatives
What are the disadvantages to group decision-making?
3
- Can take longer (“decision by committee”)
- Can be difficult to reach agreement (“different preferences”)
- Can be undermined by different kinds of group biases
Group Biases
What is ‘Groupthink’?
Pattern of faulty and biased decision making that occurs in groups whose members strive for agreement among themselves at the expense of accurately assessing information relevant to a decision
