MNGT 361 Chapter Notes - Chapter 3: Hindsight Bias, Confirmation Bias, Sunk Costs
23 Mar 2017
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Document Summary
The decision making process: identification of a problem, identification of decision criteria, allocation of weights of criteria, development of alternatives, selection of alternatives, implementation of the alternative, evaluation of decision effectiveness. Problem- a discrepancy between an existing and a desired state of affairs. Factors in the decision making process: price, model, size, manufacturer, optional equipment, fuel economy, repair records. To weigh criteria: give the most important criterion a weight of 10, compare remaining criteria against that standard to indicate their relative degrees of importance. Heuristics- help make sense of complex, uncertain, and ambiguous information. Common decision errors and biases: overconfidence, immediate gratification, anchoring effect, selective perception, confirmation bias, framing bias, availability bias, representation bias, randomness bias, sunk costs error, self-serving bias, hindsight bias. Rational decision making- choices that are consistent and maximize value within specified constraints. Bounded rationality- decisions that are rational within the limits of a managers ability to process information.
