Exam 9: Decision Making

The impact of bounded rationality is greatest when trying to make programmed decisions, and can be viewed along a continuum of rationality.

The human tendency to judge options according to the size of previous investments rather than the size of the expected return is called:

Which theory examines risk assessment, loss aversion, and dependence on a reference or starting point, and explains why individuals consistently behave in ways different from what traditional economic and decision theory would predict?

A mode of thinking that people engage in when they are deeply involved in a cohesive in-group, and when the members' striving for agreement override their motivation to realistically appraise alternative courses of action is:

The _____ heuristic leads to a bias whereby people base their decisions heavily on an example that can be easily brought to mind.

In more hierarchical cultures, only very senior managers make decisions.

Compare and contrast programmed and nonprogrammed decisions.

This method which requires the firm to think about what would happen if a significant environmental condition changed, and what the organization should do to anticipate and react to such an outcome is called:

A programmed decision needs to explore alternative solutions because the optimal solution has not yet been identified.

According to Herbert Simon, people have the ability to process all of the information and analyze all of the possible solutions to a problem.

The tendency to allocate more resources to a failing course of action is:

In prospect theory, _____ refers to the fact that people will forgo a superior choice (a potential benefit) to avoid a loss.

Satisficing occurs because it is easy to identify all the possible alternatives, and because information about available alternatives is clear.

The verdict-based approach to information gathering and decision making creates a confirming-evidence bias.

One way to overcome groupthink is for the team leader to remember that harmony is the ultimate goal.

In choosing the best alternative:

Anchoring occurs when a person is unduly influenced by an initial impression or relies on one piece of information as the key to decision making.

The rational decision model is now recognized as insufficient in describing people's behavior under many conditions.

Group decisions are more effective than individually directed decisions when the decision involves a short-range forecast.

Groupthink is a mode of thinking that people engage in when they are deeply involved in a cohesive in-group, and when the members' striving for agreement override their motivation to realistically appraise alternative courses of action.