Organizational Behaviour

Topics: Risk, Decision making, Cognition Pages: 1 (296 words) Published: March 19, 2012
Q1: Insurance companies in the state of Florida earned record profits in 2006, suggesting that Nationwide's decision to cancel policies in light of the calm hurricane seasons (in Florida) in 2005-2007 may have cost the company potential revenue and customer goodwill. Do you think Rommel's quote about making a ''sound business decision'' reveals any perceptual or decision-making biases? Why or why not?

Ans : Overconfidence bias is identified as ''the tendency to overestimate the probability that one's judgment in arriving at a decision in correct''. Rommel's quote about making a ''sound business decision'' reveals overconfidence decision-making biases.

Anchoring bias is ''a tendency to fixate on initial information and to then fail to adjust adequately for subsequent information''. His decision also disclose an anchoring bias as it is look like that Nationwide did not take into consideration some information that others did. Selective perception is ''selectively interpreting what one sees on the basis of one's interests, background, experience and attitudes''. Rommel's quote does reveal selective perception biases since they followed their own interest which is, money. Q2: Review the section on common biases and error in decision making. For companies such as Nationwide, American Airlines, and JetBlue that must respond to natural events, which of these biases and errors are relevant and why?

Ans: The first error/bias that is relevant to Nationwide Insurance company is ''overconfidence bias'' since they believed too much in their own ability to make good decision ''A sound decision''. The second error/bias is ''anchoring bias'' as they used the early first received information for making a decision ''All other companies made good revenue''.

The relevant error/bias regarding American Airline industry is ''overconfidence bias'' since they overestimated that their judgment in arriving at a decision is correct when...
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