Question 1

What is escalation of commitment?

Accepted Answer

The answer of What is escalation of commitment?...

Question 2

Which of the following statements is true regarding the hindsight bias?
A) It indicates a tendency to fixate on initial information and fail to adequately adjust for subsequent information.
B) It indicates that we seek out information that reaffirms our past choices, and we discount information that contradicts them.
C) It indicates our tendency to base judgments on information readily available.
D) It indicates our tendency to believe falsely, after the outcome is known, that we would have accurately predicted it.
E) It indicates our tendency to draw a general impression about an individual on the basis of a single characteristic, such as intelligence.

Accepted Answer

The hindsight bias refers to our tendency to believe falsely, after the outcome is known, that we would have accurately predicted it. We overestimate the extent to which we could have predicted an event, or the degree to which it was obvious, once we know the outcome. This bias can lead us to falsely believe in our own abilities to predict future events.

Question 3

One of the core problems that created the financial meltdown of 2008 was that large loans were made to individuals who could not repay them, and the finance companies purchased these bad debts without realizing how poor the prospects of repayment were. Which of the following decision-making errors was made by the lenders and borrowers?
A) hindsight bias
B) availability bias
C) overconfidence bias
D) confirmation bias
E) anchoring bias

Accepted Answer

The lenders and borrowers made the error of overconfidence bias, where they overestimated their ability to repay the loans and underestimated the risks involved.

Question 4

The ________ bias is typically associated with negotiation.
A) confirmation
B) distinction
C) anchoring
D) hindsight
E) availability

Accepted Answer

The anchoring bias is the tendency to rely too heavily on the first piece of information encountered when making a decision, in this case, the initial offer made in a negotiation. It can lead to anchoring one’s position too high or too low, depending on the initial offer.

Question 5

We tend to accept at face value information that confirms our preconceived views, while we are critical and skeptical of information that challenges these views.

Accepted Answer

This phenomenon is known as confirmation bias and has been extensively studied by psychologists.

Question 6

The more optimistic the entrepreneurs, the less successful the performance of their new ventures. Which of the following systematic biases and errors creep into their judgments?
A) hindsight bias
B) anchoring bias
C) confirmation bias
D) availability bias
E) overconfidence bias

Accepted Answer

The overconfidence bias can lead optimistic entrepreneurs to overestimate their abilities and the potential success of their venture, which can result in poor performance.

Question 7

We tend to accept at face value information that is consistent with our preconceived views, while we are critical and skeptical of information that challenges these views. This represents the ________ bias.
A) distinction
B) impact
C) hindsight
D) confirmation
E) self-serving

Accepted Answer

The confirmation bias is the tendency to seek out, interpret, and remember information in a way that confirms one's preexisting beliefs and attitudes. This means we are more likely to accept information that agrees with our views (confirmation) and reject or question information that contradicts them.

Question 8

Our tendency to believe we have some control over our world and our destiny and that we can predict the outcome of random events is the ________.
A) overconfidence bias
B) randomness error
C) bounded rationality
D) intuitive decision making
E) selective perception

Accepted Answer

The randomness error refers to our tendency to believe that we can predict the outcome of random events, which is a manifestation of our desire to see patterns and control in the world around us, even when none exist.

Question 9

People who carefully gather and consider information consistent with the rational decision-making model are more likely to engage in which of the following decision-making errors?
A) escalation of commitment
B) randomness error
C) availability bias
D) performance evaluation
E) reward systems

Accepted Answer

People who carefully gather and consider information may become more attached to a decision even when it is clear that it is no longer the right one, leading to the escalation of commitment error.

Question 10

For many people, a 50-50 flip of a coin for $100 might not be worth as much as a sure promise of $50, even though the gamble is mathematically worth twice as much as the sure thing. This is an example of ________.
A) selective perception
B) self-serving bias
C) risk aversion
D) availability bias
E) confirmation bias

Accepted Answer

This is an example of risk aversion, where people prefer a certain outcome (even if it is a lower value) over a gamble with a higher expected value but uncertain outcomes.

Question 11

An individual's place in the interview schedule may affect the interviewer's evaluation of the applicant. This is an example of confirmation bias.

Accepted Answer

This is an example of order effects, not confirmation bias. Order effects occur when the position of an item in a sequence affects how it is perceived or evaluated, whereas confirmation bias refers to the tendency to search for, interpret, favor, and recall information in a way that confirms one's preexisting beliefs or hypotheses.

Question 12

While negotiating salary with your prospective employer, if you suggest an initial target salary of $55,000, your employer will consider $50,000 to $60,000 a reasonable range for negotiation, but if you mention $55,650, your employer is more likely to consider $55,000 to $56,000 the range of likely values for negotiation. In this example your employer is exhibiting the ________ bias.
A) availability
B) anchoring
C) hindsight
D) confirmation
E) impact

Accepted Answer

The employer in this scenario is exhibiting anchoring bias, where they are affected by the anchor (initial target salary) given by the employee and use it as a reference point for negotiation. The specific amount mentioned by the employee (55,650) creates a more precise anchor, which narrows the range of negotiation for the employer.

Question 13

Which of the following types of biases in decision making represents the tendency of decision makers to prefer a sure thing?
A) hindsight bias
B) bounded rationality
C) escalation of commitment
D) selective perception
E) risk aversion

Accepted Answer

Risk aversion represents the tendency of decision makers to prefer a sure thing and avoid risks. Therefore, option E is the correct answer. Hindsight bias refers to the tendency to believe, after an event has occurred, that one would have foreseen or predicted the outcome. Bounded rationality refers to the limitations on decision-making processes faced by humans in terms of time, knowledge, and cognitive capabilities. Escalation of commitment is the tendency to invest additional resources in a failing decision or plan, even when it is clear that the plan is not succeeding. Selective perception is the tendency to perceive information in a way that supports one's preexisting beliefs or attitudes.

Question 14

Tom knows that the title insurance company made a mistake on his property title. Because of their mistake, his neighbor now has access to an easement road through the 25 acres located at the back of his property. He can't use the acreage for pasture, because his neighbor insists that the gates remain open. The title company has offered a $40,000 settlement. Tom has decided to take the settlement rather than possibly lose in court if he were to sue the title company for more money. Tom's decision is based on ________.
A) hindsight bias
B) availability bias
C) risk aversion
D) randomness error
E) escalation of commitment

Accepted Answer

Tom's decision is based on risk aversion, which means he is choosing the option with the least amount of risk. He is avoiding the possibility of losing in court by accepting the settlement offered by the title company.

Question 15

Discuss some of the errors in perceptual judgment made by interviewers in job interviews.

Accepted Answer

The answer of Discuss some of the errors in perceptual...

Question 16

The ________ bias can explain why managers doing performance appraisals give more weight to recent employee behaviors than to behaviors of 6 or 9 months earlier.
A) self-serving
B) availability
C) distinction
D) confirmation
E) hindsight

Accepted Answer

The availability bias leads people to overemphasize information that is more readily available or easily recalled. In the case of performance appraisals, recent behaviors are more salient and therefore more influential in the evaluation process.

Question 17

People who carefully gather and consider information consistent with the rational decision-making model are more likely to engage in escalation of commitment than those who spend less time thinking about their choices.

Accepted Answer

The answer of People who carefully gather and consider information...

Question 18

________ refers to staying with a decision even when there is clear evidence it's wrong.
A) Escalation of commitment
B) Hindsight bias
C) Satisficing
D) Selective perception
E) Availability bias

Accepted Answer

Escalation of commitment is the tendency to continue investing time, money, or resources into a decision or course of action even when it becomes clear that it is not working or that there are better alternatives available. This can occur as a result of cognitive biases such as confirmation bias or sunk cost fallacy, or due to social pressures and the desire to avoid admitting failure or being seen as inconsistent.

Question 19

________ is a highly complex and highly developed form of reasoning that is based on years of experience and learning.
A) Contrast effect
B) Halo effect
C) Intuition
D) Selective perception
E) Emotional intelligence

Accepted Answer

Intuition is a highly complex and highly developed form of reasoning that is based on years of experience and learning. It involves the ability to understand a situation or solve a problem without relying solely on conscious awareness or logical analysis. Intuition often involves combining multiple pieces of information and using pattern recognition to reach a conclusion. While it is not always reliable, intuition can be a valuable tool for making quick, intuitive decisions in situations where time and information are limited.

Question 20

You are part of a group, making a decision about whether it is appropriate to discontinue research on a new drug. This new drug would save lives, but it is uncertain whether you can develop it within a reasonable time frame and at a reasonable cost. Your firm has already spent a small fortune on this drug. You have gathered so much information in preparation to making the decision that you are unable to sort the good information from the superfluous data. You just feel that this project has merit. What form of decision making are you using if you decide to continue the project because you feel that the project has merit?
A) optimization
B) intuitive
C) rational
D) satisficing
E) bounded rationality

Accepted Answer

The decision to continue the project based on a "feeling" of its merit is an intuitive decision, meaning it is based on gut instinct or intuition rather than a thorough analysis of all available information.

Quiz 6: Perception and Individual Decision Making

What is escalation of commitment?

Which of the following statements is true regarding the hindsight bias?

The ________ bias is typically associated with negotiation.

We tend to accept at face value information that confirms our preconceived views, while we are critical and skeptical of information that challenges these views.

The more optimistic the entrepreneurs, the less successful the performance of their new ventures. Which of the following systematic biases and errors creep into their judgments?

We tend to accept at face value information that is consistent with our preconceived views, while we are critical and skeptical of information that challenges these views. This represents the ________ bias.

Our tendency to believe we have some control over our world and our destiny and that we can predict the outcome of random events is the ________.

People who carefully gather and consider information consistent with the rational decision-making model are more likely to engage in which of the following decision-making errors?

For many people, a 50-50 flip of a coin for $100 might not be worth as much as a sure promise of $50, even though the gamble is mathematically worth twice as much as the sure thing. This is an example of ________.

An individual's place in the interview schedule may affect the interviewer's evaluation of the applicant. This is an example of confirmation bias.

Which of the following types of biases in decision making represents the tendency of decision makers to prefer a sure thing?

Discuss some of the errors in perceptual judgment made by interviewers in job interviews.

The ________ bias can explain why managers doing performance appraisals give more weight to recent employee behaviors than to behaviors of 6 or 9 months earlier.

People who carefully gather and consider information consistent with the rational decision-making model are more likely to engage in escalation of commitment than those who spend less time thinking about their choices.

________ refers to staying with a decision even when there is clear evidence it's wrong.

________ is a highly complex and highly developed form of reasoning that is based on years of experience and learning.