AFM311 Chapter Notes - Chapter 2: Hindsight Bias, Loss Aversion, Ethnocentrism

• School: University of Waterloo
• Department: Accounting & Financial Management
• Course: AFM311
• Professor: Robert Sproule

Document Summary

Incrementalism may influence behavior of ethical people and cause them to cut ethical corners. Self-serving biases cause a person to make a decision where they tend to gather, process and remember information that advances their self-interest and support their existing views. Immediate and tangible factors are considered more than distant, abstract factors. Loss aversion: people perceive losses as worse than the gains they enjoy. Framing: people make decisions depending on how the question is framed, overconfidence, people tend to believe they are more ethical than they are. Social and organizational pressures: tendency to be overly obedient, tendency to conform excessively to ethical judgments and actions of peers. Situational factors: time pressure cause people to act less ethically, people who feel that they are not being watched will tend to act less ethically. Cognitive biases: theories about the world, people tend to simplify complex issues to make decision-making easier.