Managerial decision making

Question 1

Kahneman & Lovallo

Answer 1

1993:
- Over optimism (only consider success)
- Over pessimism (not pooling risk)
When competing for resources, overly optimistic projects win

Question 2

Moore et al.

Answer 2

2007: Myopic self-focus: managers they can do something even if others have failed. They pay little attention to the strength of the competition

Question 3

Schoemaker

Answer 3

1995: Overconfidence and tunnel vision - tend to discount evidence that goes against our beliefs - can be counteracted by scenario planning

E.g. Facebook buying WhatsApp

Question 4

Zajac & Bazerman

Answer 4

1991: Insufficient consideration of the contingent decisions of competitive others; winner’s curse; escalation of commitment - lead to capacity expansions and new business entries (either through internal development or acquisitions) that fail

Question 5

Bazerman

Answer 5

2005: Cognitive biases, anchoring, first-best decisions (rather than optimising)