Descision Making Flashcards

1
Q

Problem

A

perceived discrepancy between the current state of affairs and a desired state

problem for me is not necessarily a problem for you
problems are organizational bound
oriblem are national culture bound

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2
Q

Decisions

A

choices made from among alternatives developed from data perceived as relevant

Perception of decision maker leads to outcomes, subjective

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3
Q

Decision making models

A

rational decision making
bounded rationality

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4
Q

Outcome bias

A

we place too much weight on outcome and are not critical enough about process

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5
Q

hindsight bias

A

see events that have occurred as being more predictable than they were before they took place

“I knew it all along” effect
bad decisions that went well are repeated

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6
Q

how decisions are made

A

Content of decisions
structured or unstructured problems
operational or strategical

Context
urgency
organizational characteristics
decision makers’ attributes

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7
Q

Rational decision making

A

homo economicus: searching for the best value maximizing choice

define problems, identify criteria and allocate weights to those, develop alternatives, evaluate alternatives, select best one, implement, evaluate

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8
Q

assumptions of Rational Model (not true)

A

Complete knowledge of the situation
all relevant options are known in an unbiased manner
time is important
clear goal: the decision maker seeks the highest utility

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9
Q

Rational model in Reality?

A
  1. Limited search for problem definition, decision criteria and alternatives = we stick to easy alternatives,
  2. We choose alternatives, similar ones to those already in effect
  3. satisficing- selecting the first alternative that is good enough (stick effect)
    4.Intuition

WHY? Managers are humans

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10
Q

Bounded rationality

A

Managers are bounded by their ability to process information

Perception: we perceive things differently
We make sense
Emotion: we fall in love, we have stress
Bias: we convince ourselves that
Satisficing: we are quickly satisfied
We have no time

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11
Q

how does brain work?

A

according to emotions, biases and perceptions

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12
Q

Dual process theory

A

System 1: The cheater, reptile brain (habit, emotion based)
Default: always on
Fast
Intuitive: impulsive stereotypes, perception and emotion
What You See Is All There Is

System 2: Logical machine, the scientist (fact based)
Lazy, works only when we want it to
Slow
Wants facts, use rules
Looks actively for information: it can overrule system 1 but extrmely lazy

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13
Q

Relation between System 1 & System 2

A

System 1 is always on and busy
System 2 has two tasks: Controlling System 1
Helping System 1
When system 2 is tired, system 1 gets the say
System 1 and system 2 always fight. System 1 generally wins

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14
Q

Heuristics (information processed shortcut)

A

simple, efficient rules which people often use to form judgments and make decisions.
They are mental shortcuts that usually involve focusing on one aspect of a complex problem and ignoring others
Errors that result from these are called Cognitive Biases

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15
Q

Selective perception / attention

A

directing our awareness to some stimuli while ignoring other» why? there is a limit of info we can process

Applications ( in marketing)
Priming
Nudging

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16
Q

Priming (suggestion)

A

Familarity Bias: use of selective attention, important for marketing (repeat messages, color, etc)

Putting System 1 in the right mood

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17
Q

Nudging

A

gentle push toward good direction although all options stay open and person can choose (usually in social marketing)

It make use of all kind of heurisitics

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18
Q

The decoy effect

A

makes the best option look even better by introducing (eg middle option)

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19
Q

Availability Bias

A

people predict the frequency of an event or a proportion within a population based on how easily an example can be brought to mind

Recent information
Horrible things
Media coverage

Look for info not available easily, detail looking

20
Q

Anchoring bias

A

human tendency to rely too heavily or anchor on one trait or piece of information

21
Q

Confirmation bias

A

we see what we want to see, we hear what we want to hear, interpret and/or search info to confirm one’s perception, leads to overconfidence

related to the concept of cognitive dissonance
if we believe there is no ethical wrong-doing, we will not see any wrong doing

22
Q

Self-serving bias (attribution theory)

A

concerning self
-attribute positive events and successes to our own character or actions
-blame negative results to external factors unrelated to our character

concerning others
-attribute events and successes of others to external actors(luck)
- blame negative results to the character of other person

May lead to conflict in workplace

23
Q

Overconfidence Bias

A

ego gets in the way
thinking to be better than one actual is

24
Q

Dunning-Kruger effect

A

people with limited knowledge tend to overestimate their own competence, the other way round for people who actually have above average

25
Q

Optimism Bias

A

a mistaken belief that our chances of experiencing negative events are lower than those of our peers

Macho mistake- feeling of invulnerability

26
Q

Denomination effect

A

law of little bits: people are less likely to spend money if there is one large amount than if they spend the same amount in smaller portions

27
Q

Prospect theory (framing theory)

A

states that decisions are made based on potential value of losses and gains rather than final outcome

people will take decisions based on howoutcomes are framed

Gain frame&raquo_space; not taking risks
Loss frame&raquo_space; taking risks

28
Q

loss aversion and framing

A

people can’t stand loosing, however not winning / gaining something is less of a problem

29
Q

value function

A

gain is less valued, loss is felt deeper

eg. gambling and its prospect in different cases

30
Q

Esclation of commitment (sunk costs)

A

people justify increased investment in a decision, based on the cumulative prior investment, even if new evidence suggesting that the cost of continuing the decision outweighs the expected benefit

Sunk costs greatly affect actor’s decisions because humans are ingerently loss-averse

31
Q

Threat Label

A

threat associated to potential loss, risk more to avoid loss opportunity label: less risk will be taken

32
Q

Endowment effect (linked to loss aversion)

A

someone places a higher value on something they own simply because they own it

33
Q

Immediate gratification

A

tendency to immediately want gratification and avoid costs

34
Q

Randomness bias

A

people tend to see patterns in random things (system 1)

35
Q

Representation bias

A

judging probability of hypothesis by considering how much the latter resembles available data

eg. shy hum and library

36
Q

Intuition

A

based on implicit knowlege available to decision-maker; should not be taken at face value

37
Q

Bandwagon effect

A

believe and act in a way just because other people do so. Related to groupthink and herd behaviour

38
Q

negativity effect

A

tendency to pay more attention to negative experience

39
Q

Post-purchase rationalism

A

persuade oneself through a good rational argument that your purchase is a good value

40
Q

Blind spot bias

A

being blind towards your own bias

41
Q

Decision making styles

A

High tolerance for ambiguity
Analytical: long term, more alternatives, more flexible= external data or facts, tasks and technical concerns
Conceptual: broad perspective, many alternatives, intuition= feelings, intuition, people and social concerns

Low tolerance for ambiguity
Directive: autocratic, short term, closely analyse= external data or facts, task and technical concerns
Behavioral: love people, interaction, avoid conflict= feelings, intuition, people and social concerns

42
Q

Advantages of group decision making

A

generates more complete information and knowledge
increases diversity of views&raquo_space; creativity
increases acceptance of a solution

43
Q

Disadvatage of group decision making

A

time consuming
groupthink (dominant coalition)
conformism - group pressure, asch experiment
group shift - take positions of greater risk, may be due to diffused responsibility

44
Q

groupthink occurs

A

high group cohesiveness
lack of impartial leadership
lack of methodologial procedures
highly stressful threats
recent failures
moral dilemmas

45
Q

tips for minimizing groupthink

A

limit group size
seek input from all
leaders play impartial role
use outside experts
be aware of correlated errors

46
Q

Group decision-making techniques

A

Brainstorming
meant to overcome pressures of conformity
generates a list of creative alternatives
problem: production blocking, anchoring

Nominal Group Technique (NGT)
restricts discussion during the decision-making process to encourage independent thinking