Question 1

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

Accepted Answer

The anchoring bias occurs when a negotiator is overly influenced by the first piece of information they hear in a negotiation. This first piece of information becomes the "anchor" around which all subsequent information is evaluated, even if it is irrelevant or inaccurate. This can lead to a negotiation that is biased in favor of the person who set the anchor.

Question 2

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 is the tendency of decision makers to prefer a sure thing over taking risks. This bias arises from the fear of potential losses.

Question 3

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. It is the tendency to see events as more predictable than they really are. Option A refers to anchoring bias, Option B to confirmation bias, Option C to availability heuristic, and Option E to the halo effect.

Question 4

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

Accepted Answer

The availability bias occurs when individuals make judgments about the likelihood of an event based on the ease with which they can retrieve examples or instances of that event from memory. In performance appraisals, managers may rely too heavily on recent events because they are more easily recalled than events from further back in time.

Question 5

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

Accepted Answer

Escalation of commitment, also known as commitment bias, occurs when decision-makers continue to invest in a decision or project even when they have evidence that suggests it is failing. This can occur because they have already invested time and resources, or because of a desire to prove themselves right.

Question 6

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 7

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 are more likely to become more committed to their initial decision or plan of action, even when facing evidence that it's failing. This is known as escalation of commitment or sunk cost fallacy, which involves continuing to invest in a losing proposition.

Question 8

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 scenario described in the question is an example of the anchoring bias, where the employer's perception of what is reasonable or likely is influenced by the initial value suggested by the job candidate.

Question 9

Tom knows that the title insurance company made a mistake on his property title. Because of their mistake, his neighbour 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 neighbour 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 to take the settlement rather than risk losing in court shows that he is risk-averse. He is choosing the guaranteed payout over the potential for a larger payout through a lawsuit. Hindsight bias, availability bias, randomness error, and escalation of commitment are not relevant in this scenario.

Question 10

People always follow the rational decision-making model.

Accepted Answer

People do not always follow the rational decision-making model as humans are influenced by biases, emotions, and other factors which can lead to irrational decision-making.

Question 11

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 with the project based on a feeling of merit is an intuitive decision-making process, which relies on gut feelings or instincts rather than a thorough analysis of all available information.

Question 12

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 in this situation exhibited overconfidence bias, believing that the loans would be repaid despite evidence to the contrary.

Question 13

What is bounded rationality? How is it related to decision making?

Accepted Answer

The answer of What is bounded rationality? How is it...

Question 14

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 is known as confirmation bias, a cognitive bias where we seek out or give more weight to information that confirms what we already believe, and are more likely to dismiss or discount information that challenges our beliefs.

Question 15

________ 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 form of reasoning that draws on unconscious knowledge, experience, and feelings to make quick and accurate decisions. It is a skill that is developed over time, and relies heavily on accumulated experiences and learning. Unlike other forms of reasoning, intuition often operates outside of conscious awareness and can be difficult to articulate.

Question 16

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 statement describes the confirmation bias, which is the tendency to seek out and accept information that confirms our existing beliefs or hypotheses while ignoring or rejecting information that contradicts them.

Question 17

A common tendency related to the overconfidence bias is that as managers and employees become more knowledgeable about an issue, they become more likely to display overconfidence.

Accepted Answer

The answer of A common tendency related to the overconfidence...

Question 18

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 19

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 is when entrepreneurs have too much confidence in their abilities and the success of their venture, leading them to underestimate risks and overestimate potential rewards. This can lead to poor decision-making and a higher likelihood of failure.

Question 20

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, which is the tendency for people to prefer a sure thing over a gamble, even if the expected value of the gamble is higher.

Quiz 6: Perception and Individual Decision Making

The ________ bias is typically associated with negotiation.

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

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

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

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

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

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?

People always follow the rational decision-making model.

What is bounded rationality? How is it related to decision making?

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.

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

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 common tendency related to the overconfidence bias is that as managers and employees become more knowledgeable about an issue, they become more likely to display overconfidence.

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.

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?

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 ________.