...human judgment when making key decisions, notes Professor Jim Heskett. Is good old-fashioned intuition out of date? What do YOU think? by James Heskett In the last several years, a veritable tsunami of advice on how to make decisions has hit the Internet and what few shelves remain in our local bookstores. The advice is a distant relative of early ideas about decision theory in which we were advised to construct decision trees, mapping outcomes, attaching values to each one, and estimating probabilities that various combinations of outcomes might occur. Judgment entered into the construction of the resulting "decision trees," but the process itself was a way of injecting a certain amount of objectivity and analysis into the decision to be made. In recent years, we have been advised to make certain decisions in a "blink" by Malcolm Gladwell, to "think twice" by Michael Mauboussin, and to think "fast and slow" by Daniel Kahneman. The replacement of customs and biases with data, "big" or "small," has been intended, at least in part, to drive out such things as tradition, habit, and even superstition in endeavors ranging from child rearing to professional sports. After all, wasn't the book and film, Moneyball, at least in part a glorification of the triumph of statistics and probabilities over intuition and managerial judgment in professional baseball? Two recent books add to the genre of advice on decision-making. One advises us how to make better decisions. The other...
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...NY: Wiley. (pp. 913-915). MANAGEMENT DECISION MAKING A major concern in management has been to understand and improve decision making. Various approaches have been proposed by psychologists, most based on a “divide-and-conquer” strategy. This strategy – also labeled “problem decomposition” – involves breaking a large decision problem into smaller parts. The idea is not new: In a “Letter to Joseph Priestly,” Benjamin Franklin was one of the first to describe a decomposition strategy. The theoretical justification for this approach was outlined by Simon (1957) in his account of “bounded rationality.” This concept says that cognitive processing limitations leave humans with little option but to construct simplified mental models of the world. As Simon (p. 198) put it, a person “behaves rationally with respect to this model . . . (although) such behavior is not even approximately optimal with respect to the real world.” There have been two approaches to management decision making (Huber, 1980). The first is concerned with development and application of normative decision rules based on formal logic derived from economics or statistics. The second involves descriptive accounts of how people actually go about making judgments, decisions, and choices. NORMATIVE ANALYSES As initially outlined by von Neumann and Morgenstern (1947) in Theory of games and economic behavior, a variety of techniques have been derived for making optimal decisions. A distinction is often drawn between riskless...
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...Decision Heuristics Matt L. Bass Argosy University Online Dr. Paul Sam January 4, 2013 Abstract Managers and leaders make many business decisions on a daily basis and there are many factors that factors into how these decisions are made. From a psychological reference, heuristics are defined as a mental shortcut that describes the behavioral mechanics on how individuals solve problems and make quick and efficient decisions. Heuristics are considered proficient cognitive processes, conscious or unconscious, that ignores part of the information in making decision. This discussion examines the concept of heuristics in terms of making decisions and explaining the failure to ignore base rates, discuss the relevant factors of why associated with the decision and if the decision was framed properly to ascertain a better decision. Literature Review (Shanteau, 1989) suggested that (Kahneman and Tversky, 1982) exemplified their view of heuristics and biases as follows: "In making pre dictions and judgments under uncertainty, people do not appear to follow the calculus of chance or the statistical theory of prediction. Instead, they rely on a limited number of heuristics which sometimes yield reasonable judgments and sometimes lead to severe and systematic errors.” (Kahneman & Tversky, 1982) went on to identify three of several cognitive heuristics for risk judgments- representativeness, availability, and anchoring-and-adjustment. * Representativeness...
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...people to base their judgments on information that is readily available to them. _________________3.A style of decision making that tends to be very broad in their outlook and consider many alternatives. _________________4.It influences decision makers by suggesting to them what choices are preferable in terms of personal payoff. _________________5.The choices made from among two or more alternatives. _________________6.This refers to choices that are consistent and value maximizing. _________________7.A step in rational decision-making that requires decision maker to do this that could succeed in resolving the problem. _________________8.It is an ability to produce novel and useful ideas. _________________9.It is an unconscious process created out of distilled experience. _________________10.An increased commitment to a previous decision in spite of negative information. II. What is Representative Heuristic? III. Draw the Three Components of Creativity. Chapter 5 Management 26 Name:________________________________________________ Date:________________ I. IDENTIFICATION: 1. They are individuals who report unethical practices by their employer to outsiders. 2. The tendency for people to base their judgments on information that is...
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...Certain business decisions by a board of directors come under judicial scrutiny such as: directors acting to oppose a hostile bid for corporate control, directors responding to a tender offer and proxy contest, and when a corporate board decides to sell the corporation for cash 18B Am. Jur. 2d Corporations §1459. Majority of corporations are incorporated under the state of Delaware’s laws making those cases crucial to how business interacts with the law. The board of directors not only have to prove the good faith of the transaction but also to show its inherent fairness from the viewpoint of the corporation and those interested therein when making business decisions Zahn v. Transamerica Corp., 162 F.2d 36, 42 (1947). “Delaware has three...
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...Abstract Over the past ten years, public trust in the accounting profession has been diminished due to financial scandals brought on by poor decision making, dishonesty and a move away from morals, values, and ethics. With the perception of accounting at an all-time low, there is a need to reinvent the profession. The following pages of this research paper will examine the Model of Organizational Trust, and its three elements of ability, benevolence, and integrity. The three elements will be defined and explained using support from peer-reviewed articles. The report will also discuss the ways in which the elements are incorporated in the AICPA’s Code of Professional Conduct. The elements will be examined to learn the ways in which they help to promote trust in the accounting profession and finally, suggestions will be proposed to help improve public trust in the accounting profession. Introduction An essential component every profession must possess in order to garner satisfaction and commitment from clients and customers is trust. Trust cannot be gained quickly; it is developed over time through interactions, observations, and an understanding of another’s beliefs and values (Mayer, Davis, Schoorman, 1995). However, a person’s stated beliefs do not often dictate their behavior. In pursuit of professional goals, individuals often set aside what they know to be right and act in a manner that benefits them either financially, with recognition, or in some other manner (Six...
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...Problem Solving Paper Psych. 560 June 24, 2013 Prof. Pitt Problem Solving Paper Problem solving skills are a necessity in order to make effective decisions and manage a team. Without problem solving skills it is impossible for one to be credible and make reliable decisions each and every time. Problem-solving is a mental process that is used to discover, analyze, and solve problems. When problem solving, the ultimate goal is to conquer hurdles and come up with the best solution. Discovering and identifying the Problem can be complicated process. When individuals mistakenly identify the source of a problem incorrectly it will most often lead to inefficient or useless attempts to solve it. The aim of this paper is to identify the approaches to the study of problem-solving and inform the role of insight and creativity in the process of problem solving. The paper also seeks to examine issues with representation and solution. As well as examining the role of reasoning, judgment, and decision making in the process of problem-solving. Approaches to the Study of Problem-Solving The approaches to the study of problem solving include Behaviorism, Gestalt psychology and Cognitive Psychology. Behaviorism concentrates on what goes on in minds and solemnly focuses on general behavior. Discovered in the early twenties by John Watson but made popular by B.F Skinner, behaviorism concentrates on what goes on in minds and solemnly focuses on general behavior. They came up with a principle...
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...Judgment of Information Quality and Cognitive Authority in the Web Soo Young Rieh Excite@Home* 450 Broadway Street, Redwood City, CA 94063. Email: srieh@excitehome.net In the Web, making judgments of information quality and authority is a difficult task for most users because overall, there is no quality control mechanism. This study examines the problem of the judgment of information quality and cognitive authority by observing people’s searching behavior in the Web. Its purpose is to understand the various factors that influence people’s judgment of quality and authority in the Web, and the effects of those judgments on selection behaviors. Fifteen scholars from diverse disciplines participated, and data were collected combining verbal protocols during the searches, search logs, and post-search interviews. It was found that the subjects made two distinct kinds of judgment: predictive judgment and evaluative judgment. The factors influencing each judgment of quality and authority were identified in terms of characteristics of information objects, characteristics of sources, knowledge, situation, ranking in search output, and general assumption. Implications for Web design which will effectively support people’s judgments of quality and authority are also discussed. Introduction One of the advantages of searching in the Web is its grant of access to a great amount and a wide variety of information. As a result, however, people need some ways to reduce the...
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...and expressions of the left side of the brain vs the right side of the brain and its functions. The left side of the brain has several functions from which decisions are based. Those functions are reactions, mental magnitude and emotional expressions. All of these functions show some type of reaction to the left side of the brain and how it forms a decision. The first reaction is based upon how your expression. For example, when you are in an accident your first reaction may be shock because you didn’t expect it. Your brain sends a signal forming a type of reaction which can create an unexpected result. The reactions of how you see things, hear things and respond to them are related to the left side of the brain. The mental function is similar in its findings with the left side of the brain. It’s a mental state of being that you have when making a decision prompting from the left side of the brain. An expression of the face displays a lot when you react to something. A frown, smile or laugh shows expression which is formed by a signal from the brain. There are also studies that show that the left vs the right side of the brain has different fact findings. These studies show that both are properties of different responses. These studies prove that when the left side of the brain vs the right side is in tune to make a decision, then your brain will act accordingly with a response (Brain and Cognition Volume 77, the Issue 2, Article pages: 315-323). The right side of the brain functions...
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...Press, Chicago 60637; 1973 The ethical decision-making process begins when an individual recognizes an ethical dilemma. Subsequently, the individual makes a judgment and forms behavioral intentions, which are thought to be predictive of actual behavior. This process is affected by individual, situational and issue-contingent factors. Our study examines the effect of four issue contingencies on marketers' ethical decision-making process. More than 300 marketing professionals took part in our study, responding to questions regarding two sales scenarios. We controlled for relevant individual and situational factors and tested hypotheses using hierarchical regression. Perceptions of a greater magnitude of consequences were positively related to issue recognition and judgments that the action was unethical in both scenarios and behavioral intentions in one scenario. Perceptions of a societal consensus were associated with issue recognition and judgments that the action was unethical in one scenario. Magnitude of consequences demonstrated the strongest relationship with the ethical decision-making process. Author ISSUE-RELATED FACTORS. Conceptual research by Thomas Jones in the 1990s and subsequent empirical studies suggest that ethical issues in business must have a certain level of "moral intensity" before they will trigger ethical decision-making processes. Thus, individual and situational factors are unlikely to influence decision-making for issues considered by the individual...
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...reveals what distorts a leader’s judgment. Here’s how you can keep your own judgment clear. BY ANDREW CAMPBELL, JO WHITEHEAD, AND SYDNEY FINKELSTEIN 6 0 Harvard Business Review 1827 Feb09 Campbell layout.indd 60 | February 2009 | DECISION MAKING lies at the heart of our personal and professional lives. Every day we make decisions. Some are small, domestic, and innocuous. Others are more important, affecting people’s lives, livelihoods, and well-being. Inevitably, we make mistakes along the way. The daunting reality is that enormously important decisions made by intelligent, responsible people with the best information and intentions are sometimes hopelessly flawed. Consider Jürgen Schrempp, CEO of Daimler-Benz. He led the merger of Chrysler and Daimler against internal opposition. Nine years later, Daimler was forced to virtually give Chrysler away in a private equity deal. Steve Russell, chief executive of Boots, the Shout DECISIONS hbr.org 1/5/09 4:28:42 PM hbr.org 1827 Feb09 Campbell layout.indd 61 | February 2009 | Harvard Business Review 61 1/5/09 4:28:52 PM Why Good Leaders Make Bad Decisions IDEA put all this in context, however, we first UK drugstore chain, launched a health IN BRIEF need to understand just how the hucare strategy designed to differentiate man brain forms its judgments. the stores from competitors and grow » Leaders make decisions largely through new health care...
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...Every single investment requires decision making. The result of decision making without certain planning might not end well. One cannot simply make a decision by relying on his/her personal resources as the decision may give an impact to the investments. It is difficult to make decision which is related to the field of investments. Investors have to consider their risks, market condition, rate of return, and others in making their investment portfolio. However, there are many possible physiological biases that make investors become irrational thus making bad decisions for the investment. Illusion of Money This bias refers to investors making decisions based upon nominal terms and not real terms. It means that the confusion between the real and the actual changes in money. Why will this happen? This will happen because the investor lack of the knowledge in finance. They only will see the money that can get by them but never accounting the inflation and the time value of money. As an example, an investor invests their money in a bond and it will yield 10% in the future. It sound attractive but we are get nothing when the inflation are also 10%. This kind of investment will mislead the investor that lack of general knowledge in finance becomes irrational thus making bad decision for the investment. Overconfidence First that is overconfidence. Overconfidence obviously mean in overtrading or switching between investment accounts in an effort to increase returns. Overtrading will...
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...competitiveness at both home and abroad, discuss a theoretical framework for the study of aviation competitiveness, establish an index system with 5 first-order indicators and 17 second-order indicators, set up a Chinese aviation competitiveness model based on simple fuzzy numbers from the Fuzzy Analytic Hierarchy Process, and evaluate the competitiveness of 5 major Chinese airlines. The results show that this model and these indicators are scientific and practical, with a wide range of application prospects for the purpose of improving and increasing Chinese airline competitiveness in the international market. The effective approach presented in this paper is especially applicable when subjective judgments on performance ratings and attribute weights are not accessible or reliable, or when suitable decision makers are not available. Keywords: aviation competitiveness; simple fuzzy numbers; fuzzy analytic hierarchy process _____________________________________________________________________ 1. Introduction Along with China’s increased economic development, the Chinese aviation market has likewise grown increasingly rapidly; the Chinese domestic competition has consequently become...
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...pragmatic approach. They review research designed to evaluate Kohlberg’s model, describe how they revised the model to accommodate discrepant findings, and explain why they concluded that it is poorly equipped to account for the ways in which people make moral decisions in their everyday lives. The authors outline in 11 propositions a framework for a new approach that is more attentive to the purposes that people use morality to achieve. People make moral judgments and engage in moral behaviors to induce themselves and others to uphold systems of cooperative exchange that help them achieve their goals and advance their interests. Keywords: moral development, cognitive development, cooperation, moral judgment After two decades of research on Kohlberg’s (1984) cognitive– developmental model of morality, we abandoned it in favor of a more pragmatic approach. In this article, we explain why. We identify problems with Kohlberg’s model, describe revisions aimed at solving them, and offer reasons why a new approach is necessary. We end with a new beginning, introducing a more pragmatic approach in a set of propositions that, we argue, is better equipped than Kohlberg’s model to account for the ways in which people make moral decisions in their everyday lives. This approach rests on the assumption that individuals invoke a variety of affectively and cognitively-based strategies to pursue goals and advance their...
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...Psychology of Decision Making Personality in Decision Making Definition of Personality * Encompass the characteristic traits and patterns of adjustment of a person in his interrelationships with others and his environments. * A holistic concept which is inclusive if those integrated qualities, impulses, habits, interests, ideals and other characteristics that compose the individual as he exist in society. * The entire system if relatively permanent tendencies, both physical and mental, that are distinctive of a given individual, and determine his characteristic adjustments to his material and social surroundings. * The pattern of organization of various responses made by individuals in the presence of general consistency to all the different kinds of behavior in which the unique or individual aspects of behavior. * Viewed as representing the essence of a person – what the person really is. It consists concretely of a set of scores or descriptive terms which are used to describe the individual being studied according to the variables or dimensions which occupy a central position within the particular theory utilized. Biological, Subconscious, and Hereditary Forces * Sigmund Freud – developed the concept of subconscious mind. * Human beings are dominated by subconscious motives and emotions * Early stages of childhood form the most important basis for adult personality * People are governed by two basic drives: ...
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