Week 8 Flashcards
1
Q
problem
A
- a discrepancy between some current state of affairs and some desired state
2
Q
opportunity
A
- something unplanned happens, giving rise to thoughts about new ways of proceeding
3
Q
decision
A
- choice made from two or more alternatives
4
Q
“rational” decision making
A
- makes consistent, value maximizing choices with specified constraints
- assumption of classical/neoclassical economics
5
Q
problem clarity
A
- the problem is clear and unambiguous
6
Q
known options
A
- the decision maker can identify all relevant criteria and viable alternatives
7
Q
clear preferences
A
- the criteria and alternatives can be ranked and weighted
8
Q
constant preferences
A
- specific decision criteria are constant and the weights assigned to them are stable over time
9
Q
no time or cost constraints
A
- full information is available because there are no time or cost constraints
10
Q
maximum payoff
A
- the choice alternative will yield the highest perceived value
11
Q
Actual decision making
A
1) bounded reality
2) satisficing
3) intuition
4) judgement shortcuts
12
Q
bounded rationality
A
- liiations on one’s ability to itnerpret, process, and act on information
13
Q
satisficing
A
- identifying solution that is “good enough”
- the first acceptable option rather than the optimal one
14
Q
intuition
A
- a non-conscious process created form distilled experience that results in quick decision
- relies on holistic associations
15
Q
when making decisions we often:
A
1) take shortcuts
2) have biases
16
Q
overconfidence bias
A
- believing too much in our own ability to make decisions - especially when outside of own expertise
- the weaker the ability, the more likely to overestimate performance/ability
17
Q
Dunning-Kruger effect
A
- low ability individuals think they are better than they are
- you need a certain level of skill/knowledge in an activity to realize how truly bad you are
18
Q
anchoring bias
A
- using early, first received information as the basis for making subsequent judgements
19
Q
confirmation bias
A
- selecting and using only facts that support our decision
20
Q
availability bias
A
- emphasizing information that is most readily at hand
21
Q
Irrational Escalation of Commitment
A
- increasing commitment to a decision in spite of evidence that is wrong - especially if responsible for the decision
22
Q
randomness error
A
- the tendency to believe that we can predict the outcome of random events
23
Q
risk adversion
A
- the tendency to prefer a sure gain over a riskier 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 paying $50)
24
Q
ethics
A
- broadly applied social standards for what is right or wrong in a particular situation
- ethics are socially constructed
25
Q
Milton Friedman (1970)
A
- managers have a “responsibility to conduct business in accordance with their (shareholders) desires, which will be to make as much money as possible - while conforming to the basic rules of the society, both those embodied in law and those embodied by ethical custom”
