IM Ch 9 Quiz
_____ occurs when a person relies on one piece of information as the key to decision making.
Anchoring
Which of the following statements about the normative model of decision making is true?
It is decision making using a rational model.
What is the scarcity principle?
Items and opportunities are seen to be more valuable as they become less available.
Which of the following is arguably the most important step in rational decision making?
Problem identification
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?
Prospect theory
Which of the following is NOT a symptom of groupthink?
Stereotyping of in-groups
Someone who argues against the decision being contemplated, allowing the rationale for the decision to be checked is a:
devil's advocate.
In prospect theory, _____ refers to the fact that people will forgo a superior choice (a potential benefit) to avoid a loss.
loss aversion
The "representativeness" heuristic can result from all of the following:
misunderstanding probabilities, neglecting relevant base rates, seeing patterns where none exist.
New, complex, or abstract problems require _____ decisions, wherein decision makers must search for alternatives and possibly craft a unique solution.
nonprogrammed
The _____ heuristic leads to a bias whereby people base their decisions heavily on an example that can be easily brought to mind.
availability
The "representativeness" heuristic can result from all of the following EXCEPT:
being unduly influenced by initial impressions.
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:
bounded rationality.
The ability of members of the group to think differently, and to express their opinions and findings is:
cognitive diversity.
The tendency to allocate more resources to a failing course of action is:
escalation of commitment.
Many projects result in escalation of commitment when decision makers underestimate the risk and overestimate their probability of success. This is called the:
gambler's fallacy.
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:
groupthink.
The following are symptoms of groupthink:
illusion of invulnerability, rationalization, direct pressure.
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):
programmed decision.
"Sensors":
rely on facts and empirical evidence.
When bounded rational decision makers focus on alternatives that are "good enough" rather than on finding the best possible solution, they engage in:
satisficing.
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:
scenario planning.
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:
sunk-cost trap.
In choosing the best alternative:
the selection criteria must be ranked by importance and given a weighted rating such as from 1 to 10 or some other scale.
The human tendency to judge options according to the size of previous investments rather than the size of the expected return is called:
the sunk-cost fallacy.
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:
verdict-based information search.