Biases in Managerial Decision Making

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Presentation transcript:

Biases in Managerial Decision Making Biases resulting from attention and memory related constraints Biases resulting from underprocessing Biases resulting from overprocessing

Biases Resulting from Attention and Memory-Related Constraints Salience and vividness effects Context effects Biased assimilation Pseudodiagnosticity

Attention and Memory Related Contraints...

Subjective values as a function of gains versus losses

Pseudodiagnosticity Success Rate 100% 70% 0% Success Rate Success for New Other Consulting Success rate Product Ventures Firms’ Success Rate For New Products (one consulting firm) for New Products without Consulting Firms

Biases Resulting From Underprocessing The representativeness heuristic (similarity-based judgment) The availability heuristic (memory-based judgment) The simulation heuristic (imagination-based judgment) The anchoring-and-adjustment heuristic

Preference reversal Choice of gamble Choice of gamble Gamble A Gamble B Gamble A Gamble B Anchor of Outcomes Anchor of Probabilities

Biases Resulting From Overprocessing Correspondence bias Using irrelevant analogies The perseverance effect The dilution effect Premature cognitive commitment Overcorrection for blatant sources of bias Overinterpretation of random events

7 Habits...