Chapter 11: Decision Making

Question 1

Decision making

Answer 1

The process of developing a commitment to some course of action.

Question 2

Perfect Rationality vs Bounded Rationality

Answer 2

Perfect Rationality: A decision strategy that is completely informed, perfectly logical, and oriented toward economic gain

Bounded Rationality: A decision strategy that relies on limited information and that reflects time constraints and political considerations

Question 3

Framing Effect

Answer 3

Decisions are influenced by how choices are presented (e.g., gain vs. loss framing)

If information is framed positively (gain frame), it encourages conservative decisions (risk averse)

Question 4

Prospect Theory—Loss Aversion

Answer 4

Value of gain < value of loss…

Question 5

Escalation of Commitment

Answer 5

Persisting in a failing course of action due to sunk costs, overconfidence, or framing.
o Throw good resources after bad, acting as if one can recoup sunk costs

Question 6

Functional Bias

Answer 6

Problems are framed through one’s own specialty lens (e.g., marketers focusing on marketing solutions).

Question 7

Premature Solutions

Answer 7

Decisions made based on preconceived solutions rather than actual problem analysis

Question 8

Symptoms vs. Causes

Answer 8

Addressing surface issues without diagnosing root causes (e.g., addressing morale without considering pay or work conditions).

Question 9

Availability Bias

Answer 9

Reliance on easily accessible or recent information

Question 10

Not-Invented-Here Bias

Answer 10

Ignoring external solutions or innovations

Question 11

Groupthink

Answer 11

A phenomenon where group pressure reduces mental efficiency, reality testing, and moral judgment, leading to suboptimal decisions.

Question 12

Why does groupthink happen?

Answer 12

• Strong identification with the group
• Concern for group’s approval
• Isolation of the group from other sources of information
• Promotion of decision by group leader
• High level of cohesiveness

Question 13

Some groupthink symptoms

Answer 13

• Illusion of invulnerability
• Rationalization
• Illusion of morality
• Stereotypes of outsiders
• Pressure to conform
• Self-censorship
• Illusion of unanimity
• Mindguards

Question 14

Recommendations to Mitigate Groupthink and Enhance Decisions

Answer 14

• Leaders should avoid promoting specific outcomes and focus on decision-making processes.
• Encourage dissent and reward constructive criticism.
• Involve external experts to challenge the group’s perspective.
• Appoint a devil’s advocate to objectively critique proposed plans and strategies.