Deck 9: Decision Making

Question 1

The representativeness heuristic occurs when seeming patterns are assumed to represent something that the data warrant.

Answer 1

False

Question 2

One effective way to minimize escalation of commitment decision problems is to separate decision choosers from decision evaluators.

Answer 2

True

Question 3

A programmed decision needs to explore alternative solutions because the optimal solution has not yet been identified.

Answer 3

False

Question 4

The decision process is directed toward changing the root causes of difficulties so that the symptoms are reduced or eliminated.

Question 5

Research shows that while verdict-based decision making, which employs a broader information search, is much more likely to lead to better decisions, evidence-based decision making is still very common.

Question 6

Research in psychology, management, and political science shows that people regularly make decision errors that are based on discernible emotional states.

Question 7

Groupthink is a mode of thinking that people engage in when they are deeply involved in a cohesive in-group, and when the members' striving for agreement override their motivation to realistically appraise alternative courses of action.

Question 8

The availability heuristic operates on the notion that if you can think of something, it must be important and will become part of your decision.

Question 9

The advantage of scenario thinking is that the importance of one or two key criteria such as the cost of a raw material or the price of a substitute product can be clearly identified and properly dealt with.

Question 10

The rational decision model is now recognized as insufficient in describing people's behavior under many conditions.

Question 11

The verdict-based approach to information gathering and decision making creates a confirming-evidence bias.

Question 12

Satisficing occurs because it is easy to identify all the possible alternatives, and because information about available alternatives is clear.

Question 13

A poorly framed problem can undermine even the best-considered decision.

Question 14

The impact of bounded rationality is greatest when trying to make programmed decisions, and can be viewed along a continuum of rationality.

Question 15

What helps to energize the escalation of commitment problem is the status quo trap, which is the deep-seated bias to make present decisions in order to justify past choices.

Question 16

One way to overcome groupthink is for the team leader to remember that harmony is the ultimate goal.

Question 17

In the rational model of decision making, decision makers determine the appropriate decision criteria, such as price and quality, and then assign weights or levels of importance to them.

Question 18

According to Herbert Simon, people have the ability to process all of the information and analyze all of the possible solutions to a problem.

Question 19

Decision support systems are driven by human input that guide people through the decision-making process.

Question 20

Anchoring occurs when a person is unduly influenced by an initial impression or relies on one piece of information as the key to decision making.

Question 21

Which theory examines risk assessment, loss aversion, and dependence on a reference or starting point, and explains why individuals consistently behave in ways different from what traditional economic and decision theory would predict?

A) Prospect theory
B) Game theory
C) Probability theory
D) Administrative theory of individual decision making

Question 22

_____ occurs when a person relies on one piece of information as the key to decision making.

A) Escalation of commitment
B) Anchoring
C) Adjustment
D) Loss framing

Question 23

''Sensors'':

A) are often very deductive.
B) rely heavily on images, emotion and logic.
C) draw heavily on certain basic principles from which they prefer not to deviate.
D) rely on facts and empirical evidence.

Question 24

In more hierarchical cultures, only very senior managers make decisions.

Question 25

The impact of bounded rationality is greatest when trying to make _____ decisions, and can be viewed along a continuum of rationality.

A) nonprogrammed
B) intuitive
C) heuristic
D) structured

Question 26

A decision that follows standard operating procedures, and where there is no need to explore alternative solutions because the optimal solution has already been identified and documented is a(n):

A) programmed decision.
B) heuristic decision.
C) intuitive decision.
D) creative decision.

Question 27

Group decisions are more effective than individually directed decisions when the decision involves a short-range forecast.

Question 28

Situation-accepting managers are likely to believe that they themselves are the prime or only influence on the same process.

Question 29

When bounded rational decision makers focus on alternatives that are ''good enough'' rather than on finding the best possible solution, they engage in:

A) heuristics.
B) satisficing.
C) programmed decision making.
D) nonprogrammed decision making.

Question 30

In prospect theory, _____ refers to the fact that people will forgo a superior choice (a potential benefit) to avoid a loss.

A) risk seeking
B) loss aversion
C) source dependence
D) escalation of commitment

Question 31

Someone who argues against the decision being contemplated, allowing the rationale for the decision to be checked is a:

A) collaborator.
B) group facilitator.
C) devil's advocate.
D) group-thinker.

Question 32

This method which requires the firm to think about what would happen if a significant environmental condition changed, and what the organization should do to anticipate and react to such an outcome is called:

A) computer simulation.
B) sensitivity analysis.
C) contingency planning.
D) scenario planning.

Question 33

A process of information search and decision-making that starts with the presumed answer to the decision and proceeds to only seek out information that confirms the initial verdict or decision is:

A) verdict-based information search.
B) evidence-based information search.
C) documentation-based information search.
D) proof-based information search.

Question 34

In choosing the best alternative:

A) if decision makers cannot find an acceptable ready-made solution, then they would normally try to design a custom-made solution.
B) decision makers must rally employees and prepare sufficient resources to make and implement the decision.
C) firms must consider the motivation, ability, and role perceptions of employees implementing the solution.
D) the selection criteria must be ranked by importance and given a weighted rating such as from 1 to 10 or some other scale.

Question 35

Cognitive diversity is the ability of members of the group to think differently, and to express their opinions and findings.

Question 36

New, complex, or abstract problems require _____ decisions, wherein decision makers must search for alternatives and possibly craft a unique solution.

A) heuristic
B) satisficing
C) nonprogrammed
D) intuitive

Question 37

According to the administrative theory of individual decision making, people do not have the ability to process all of the information and solutions that face them, which leads them to limit their problems and solutions. This is known as:

A) satisficing.
B) uncertainty.
C) bounded rationality.
D) devil's advocacy.

Question 38

Which of the following statements about the normative model of decision making is true?

A) It describes how people actually behave.
B) It is decision making using a rational model.
C) It is not the idealized decision-making model.
D) It is the actual, day-to-day decision-making model.

Question 39

Which of the following is arguably the most important step in rational decision making?

A) List of solutions
B) Problem identification
C) Appropriate decision style
D) Choosing the best alternative

Question 40

It is commonly believed that when using a group to make a decision, a simple agreement or consensus will be reached.

Question 41

Many projects result in escalation of commitment when decision makers underestimate the risk and overestimate their probability of success. This is called the:

A) fallacy of distribution.
B) regression fallacy.
C) gambler's fallacy.
D) red herring fallacy.

Question 42

The _____ heuristic leads to a bias whereby people base their decisions heavily on an example that can be easily brought to mind.

A) representativeness
B) framing
C) anchoring
D) availability

Question 43

Explain at least four ways by which firms can overcome groupthink.

Question 44

Which of the following is NOT a symptom of groupthink?

A) Stereotyping of in-groups
B) Illusion of invulnerability
C) Rationalization
D) Direct pressure

Question 45

Write an explanatory note on the sunk-cost trap.

Question 46

Many individuals will refuse to sell a stock or a mutual fund at a loss even though it may be clear that the investment will not turn around. This is an example of a:

A) sunk-cost trap.
B) anchoring trap.
C) status-quo trap.
D) confirming-evidence trap.

Question 47

How can managers overcome escalating commitment problems?

Question 48

Compare and contrast programmed and nonprogrammed decisions.

Question 49

Write an explanatory note on how cultural factors can affect decision making.

Question 50

The "representativeness" heuristic can result from all of the following EXCEPT:

A) misunderstanding probabilities.
B) neglecting relevant base rates.
C) being unduly influenced by initial impressions.
D) seeing patterns where none exist.

Question 51

A mode of thinking that people engage in when they are deeply involved in a cohesive in-group, and when the members' striving for agreement override their motivation to realistically appraise alternative courses of action is:

A) confirmation bias.
B) groupthink.
C) herd mentality.
D) group polarization.

Question 52

The human tendency to judge options according to the size of previous investments rather than the size of the expected return is called:

A) economic loss.
B) the sunk-cost fallacy.
C) groupthink.
D) a framing error.

Question 53

The tendency to allocate more resources to a failing course of action is:

A) escalation of commitment.
B) risk aversion.
C) representativeness.
D) anchoring.

Question 54

The ability of members of the group to think differently, and to express their opinions and findings is:

A) groupthink.
B) identity diversity.
C) identity orientation.
D) cognitive diversity.

Question 55

What is groupthink? Why is it considered to be problematic?

Question 56

What is a confirming-evidence bias?

Question 57

What is the scarcity principle?

A) Most people feel worse about a loss of a given amount than they would feel good about a gain of a similar amount.
B) People tend to focus on losses (or loss avoidance) in making decisions.
C) Alternatives that are acceptable or ''good enough,'' rather than the best possible solutions.
D) Items and opportunities are seen to be more valuable as they become less available.