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chapter 5 case incident 1

chapter 5 case incident 1 - Katherine Lau BUAD 304 Thursday...

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Katherine Lau BUAD 304 – Thursday AM Discussion Judy Tolan September 15, 2009 Case Incident 1: Natural Disasters and the Deicisions That Follow 1. Do you think Rommel’s quote about making a “sound business decision” reveals any perceptual or decision-making biases? Why or why not? Rommel clearly seems to be affected by decision-making biases supported most clearly by the fact that soon after his introduction to Nationwide Insurance, his decision to cancel homeowners’ policies garnered negative attention, hurt consumers, and ended up costing the company what would have been a large sum of revenue. It seems plausible that he could have suffered from the overconfidence bias, based on his optimism that he was making the right decision in canceling policies despite the fact it would hurt his customer goodwill and also based on the fact that those effected by overconfidence bias are most commonly the weakest in their intellectual and interpersonal abilities, which he could have been considering he was new to the company. Similarly, his quote seems to reveal an escalation of commitment. Although he admits that the decision was not a good one for the policy holders, he attempts to justify his decision by saying it was a decision that was beneficial for the company. However, it is clear that it was not a good business decision because it most probably cost the company revenue. It seems that in his
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