1 Business System Analysis & Decision Making - Lecture 9 Zhangxi Lin ISQS 5340 July 2006

2 Chapter 8: Bounded Ethicality Overclaiming Credit Implicit Attitudes In-Group Favoritism Discounting the Future The Psychology of Conflict of Interest

3 Bounded Ethicality in E-Commerce The case of eBay trading. See negative feedbacks Problems may occur if A seller did not advertise all known information about the status of the product being auctioned, particularly the negative aspect. He simply pay less attention to that aspect. He believe this is a normal way people doing it: more confirmative A seller did not provide enough help information to buyers when selling something. A seller tend to compare his price with the highest price in the market, claiming that his product is a better deal A seller tend to compare the quality of his product with the one with lowest quality in the market, claiming that his product is a better deal

4 China Fights For Its Wireless Standard Against Intel-Backed i Chinese officials say the approval process for a wireless security standard was unfairly stacked against its WAPI. It could be the start of more such disputes. (InformationWeek, 03/31/ ) The problems of the WAPI proposal Not well supported by China’s domestic companies May negatively affect stakeholders’ interest Compatibility is not good enough yet to other Wi-Fi standards However, it does not mean it makes no sense. Should it be blocked for the normal approval procedure? Incidence Intel Chinese delegation was to attend an IEEE workshop last year held in the US, but the key technical persons’ visa application were denied. Any ethicality factor behind the situation?

5 Overclaiming Credit Coauthors often overclaim credit for their joint work Nobel Prize winners overclaim their credit in the contribution How to stop overclaiming? Thinking about others’ contributions first

6 Implicit Attitudes The case of John Smith’s VC decision making Harvard’s research website: Implicit attitude are rooted in ordinary mental processes of categorization, perception, memory, and judgment -> ordinary prejudice Highly predictable in nonverbal behaviors to different groups of people More likely to occur when decision makers are operating under System 1 thinking

7 In-Group Favoritism We tend to identify with people who are a lot like us. We are more comfortable doing favors for those with whom we identify than for those noticeably different from us. Two situations Favor Allocating scarce resources

8 Discounting the Future We are consuming environmental resources at an ever-increasing rate. Our ever-increasing desire to consume more than we did in the past causes us future harm. Spending too much hurts our funds for retirement

9 The Psychology of Conflict of Interest Conflict of interest exists in many of our businesses I am coauthoring papers with my colleagues. Some of them are in the same seniority status of faculty – we are junior faculty. Should will compete for the limited number of tenure positions a few years later?

10 The Psychology of Conflict of Interest ADT Security Company suggested you that the new area you are moving in needs better security. So they can install the alarm system for you but you need to pay the company $35/month for the contract of three years. Is the security condition really bad in the area? Everybody knows that spyware and addware are bad. Some companies made special spyware/addware they just bothering you now and then. A message then advice you go to their website to do free scan. The outcome of the scan is horrible: Your computer has been infected with 500 different spyware/addware – many of them are high risk – they may steal your secret information, such as your bank account login information. Then you are offered to buy their anti-spyware product, which costs you 50 bucks. Actually, these companies do not really want to make too much damage to your computer or personal informatino security. They simply want you to pay for their services.

11 Conclusions It becomes clear that it would not have been possible for just a few people to create the problems if others around them behave ethically. Most people hold a stable view of themselves as moral, competent, deserving, and immune from ethical challenges. This high self-esteem keeps us from monitoring our own behavior and makes bounded ethicality all the more likely.