Bazerman, M. H. & Moore, D. A. (2009). Common biases. Chapter 2 of Judgment in Managerial Decision Making. New York: John Wiley & Sons. Read pages 14-33 and 36-41 (i.e., skip bias 10).…
10. How did Kaheman and Tversky demonstrate overconfidence? 11. Describe the advantage and disadvantage of being overconfident? 12.…
In this paper hopefulness and optimism will be compared and contrasted and a review under what circumstances might optimism is harmful. Then the paper will explore defensive pessimism and under what circumstances might this be beneficial.…
There are four factors that cause people to have unrealistic optimism: Their desired end state, their cognitive mechanisms, the information they have about themselves versus others and overall mood. Studies show that most humans are disposed to unrealistic optimism. Illusory optimism increases our vulnerability. This cognitive bias prevents people from taking precautionary measures in life, especially regarding health conditions.…
1) Overconfidence. It’s somebody who over value their assets. Barbara Meyers who is the owner of the Bears is overconfidence. 2) Under confidence. It’s somebody who under value their assets. Billy Curry and Ted are under confidence.…
As humans, most of our decisions tend to be impetuously-based, meaning that the decision was not thoroughly thought through. These decisions often lead to negative consequences of which can greatly effect one’s life as the result or the outcome was never thoroughly considered. But, luckily, as humans we also possess another side that alters the impetuous thinking into more logical ideas called rationality. Rationality, oppose to impetuosity, means that before one makes a decision, one would deliberate over the decision and forethought about the outcome to make sure the decision is reasonable and wise. Shakespeare’s play of Romeo & Juliet, conveys the message of how that tiny spark of impetuosity during one’s teenage years can lead to negative and devastating consequences, of which changed one’s life forever in a not favorable way.…
Drummond H., (2012). Guide to Decision Making Getting it more right than wrong. london: Profile Books Ltd. p125.…
A general decision making criterion involves several factors. What this journal focuses on is the influence of others’ decisions on one’s own, namely, the act of “looking up and looking around”. In any given situation it is human nature to first “look up”- that is, see what a more knowledgeable person (such as the boss) is doing, and then take a decision as to how one would act. The second option is to “look around”- that is, see what one’s colleagues and peer are doing and follow suit. The author also writes on how “decision-making paralysis” hits everyone from middle range managers to even the top managers and CEO. When presented with a problem, the mind goes blank and the person the question is directed to is stuck in a rut. Either they don’t know how to solve the problem and are looking for someone else to take the burden; or they are apprehensive to make any decisions because they might fail. Many managers suffer severe anxiety that their incapability might be found out. That’s why senior managers are more preferred as they have a greater hold over making a decision based on their gut instinct. Decision-making is not only the manager’s headache, it also depends on the structure and progress of an organization. Many managers are pushed to make decisions within a short time, and that too decisions based on information passed on from the junior levels. On several occasions the information may not be particularly correct and that would result in a decision made on unreal situations. A manager’s worst dream: a wrong decision. Many a times, there is that one person in the organization who has to take the blame and walk away. This happens regularly in corporate mishaps. In order to be successful in an organization, the author claims that one has to have quick thinking abilities and to move forward fast.…
Behind every risk of decision made, or that will ever be made, lies certain varying degrees of certainty and doubt; the individual must decide based on the situation. However, in relation to both short term and long term activities, people should not act with a high degree of certainty, but rather act with a sensible, if not a considerable amount of doubt. In fact, the masses should act with a heavier amount of doubt, and a minuscule amount of certainty; either to save themselves from excessive pretension, or for the safety of themselves and those around them.…
Chou, K., Ho, Andy H. Y., Lee, Tatia M. C., (2007). Does Mood State Change Risk Taking Tendency in Older Adults? Journal of Psychology and Aging, 22(2), 310-318.…
Confirmation bias is the human habit of seeking information that confirms one’s judgments or assumptions. One’s current feelings about a situation, memory, or person influence one’s thoughts and memories about that situation, memory, or person. If one is feeling negatively about something or someone, the individual will often recall the worst factors or memories about that person or circumstances. However; if one is feeling positively about something or someone, the individual may recall the best factors or memories about that person or circumstances. In this way, one confirms his or her own current feelings. This can end badly; if bad feelings lead to bad memories; which then lead to more bad feelings, in a vicious cycle. This may also cause problems when someone becomes overconfident about someone or something; when his or her positive feelings lead to positive memories and positive expectations [ (Myers, 2012) ].…
Confidence is an important quality for life on the road as a truck driver and for life in general. However, too much of it causes the driver to discard caution and makes him complacent. This is asking for trouble when you're engaged in an inherently risky activity which truck driving most certainly is. If the risk didn't exist, there wouldn't be a need for commercial truck insurance.…
Decision-making is one of the fundamental keys to the survival of an organization, more so now that economic boundaries between countries crumble, business becomes more complex, and the results of decisions often have global impact. Decisions are made constantly in business; it is the part and parcel of being effective in one 's job. Innovation and improvement on a regular basis are required to maintain and improve the ability to make rational decisions, and some psychologists even believe that the ability to make effective decisions is at the core of the individual 's success of failure within their organization (Porter, 1998). Managers, in particular, realize that if their organizations are to survive in this dynamic and uncertain environment, they have to make decisions concerning new business opportunities, products, customers, suppliers, markets and technical developments. This clearly indicates that the most important managerial attribute is the ability to make the right decision. The outcomes of the decisions will be used as the benchmark to evaluate whether managers are successful (Drucker, 2001).…
Very often the reason for bad decision-making is because of errors or miss-steps in the decision making process, as I have briefly noted. However, sometimes it is mind of the decision maker who is at fault in contrast to the decision making process. Hammond et al has revealed that we use unconscious routines to cope with the complexity inherent in most decisions. These routines are known as “heuristics”. Heuristics can benefit in many situations but in contrast can be misperceived. Another trap is the irrational anaomlies in our thinking. Both flaws are engraved into our thinking process and consequentially we fail to recognize them and ignore them. Pyschological traps can undermine the most carefully considered decisions, and may be even more dangerous than the eight most common errors in decision making listed in Smart Choice’s. “The best protection against these traps is awareness”.…
Shefrin and Statman show that fearing, regret and seeking pride causes investors to be predisposed to selling winners too early and riding losers too long. They call this the disposition effect. T. Odean used four components to describe disposition effect.…