test 2 - fall

# test 2 - fall - Heuristics Errors biases Availability...

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Heuristics Errors – biases Availability heuristic Frequency of an event Higher the frequency – easier to recall May seem more frequent because it is easy to recall Example: Reebok vs. American international group – made more (pick Reebok -bias) Representative heuristic Matching with pre-existing category Stereotypes Can miss opportunities Discrimination – unethical, illegal Example: shy, small, poetic – Asian vs. psychology major We hate to lose – when losing we take higher risks. Overestimate the frequency of an event Hard to imagine How many events can we remember 7 plus or minus 2 In the gamblers fallacy, the person believes after a number of unfortunate events Nearly the sure thing – believer’s success is nearly a sure thing Decision is framed negatively the decision maker is Is likely to take more risks Decision-Making and Types of Decisions Programmed (first line) Specific procedures that have been developed for routine, repetitive problems Rule for making decisions Majority of decisions Act score high enough = admittance to the university Non-programmed Specific solutions that to problems that are novel, unique, complex, and unstructured Increase going up the mgmt pyramid Decision Making Conditions (exist on a continuum) 1. Certainty Zero ambiguity (the amount of unknown in the decision) Probability of making a bad decision is low!

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No element of chance; the outcome of alternatives are known with 100% certainty (a probability of 1.0) Alternatives and outcomes A -1 (100% - 1.0) (\$150) ; b – 2 (100% - 1.0) (\$75) ; c – 3 (100% - 1.0) (\$200) 2. Risk A-1 (50% - .5) (\$200 - \$100) ; B-2 (33% - .33)(\$100 - \$33) ; C-3 (10% - .1) (\$1,500 - \$150) Managers know the alternatives but their outcomes are in doubt Make sure you probabilities are correct (probabilities with varying outcomes) MOST COMMON 3. Uncertainty Great deal of ambiguity Most difficult condition Probability of making a bad decision is high! Worst case – alternatives and outcome all ?’s Best case (typical scenario) a- ? ; b- ? ; c- ? --- know alternatives not outcomes SWAG – Scientific Wild Ass Guess How do you tell the difference between these? – the probabilities!! Program – certainty Non-program – uncertainty Risk – both Program (at the casino, playing blackjack standing on 17) Which of the following is true concerning decision-making? Is not a function of management (most associated with planning) Rule: Weak- hand shake – bad salesperson Programmed (rule) RISK (not certainty or uncertainty) Making a high school degree an essential requirement for this job (8/10 – degree work well) Probability 1 = certainty Anything between = risk True under risk: Playing the odds well, a negative outcome may result Most common (most difficult is uncertain, less frequent uncertainty, easiest certainty) Decision-making programmed decisions Certainty and risk Non programmed – uncertainty and risk
Traditional Model of Decision-Making Assumes decisions are made under conditions of certainty

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## This note was uploaded on 10/07/2011 for the course MGT 3200 taught by Professor Sauley during the Fall '06 term at LSU.

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test 2 - fall - Heuristics Errors biases Availability...

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