tailieunhanh - Lecture Judgment in managerial decision making (8e) - Chapter 5: Framing and the reversal of preferences

After studying this chapter, you should be able to: Describe why an understanding of basic approaches to ethical decision making and corporate social responsibility is important, explain the basic approaches to ethical decision making, identify the different implications of each approach in real-life situations,. | Judgment in Managerial Decision Making 8e Chapter 5 Framing and the Reversal of Preferences Copyright 2013 John Wiley & Sons As noted previously, we tend to use heuristics, or rules of thumb, to reduce the complexity of our decisions. Often, these heuristics allow us to make effective decisions in a short amount of time. However, under the right set of circumstances they can also lead us into making biased decisions. Avoiding the biases that come with the use of heuristics is so difficult that even the most intelligent people are prone to error. Before introducing key biases, take a few minutes to answer the following questions. Write down your answers. 1 The Asian Disease Problem Imagine that the United States is preparing for the outbreak of an unusual Asian disease that is expected to kill 600 people. Two alternative programs to combat the disease have been proposed. Assume that the exact scientific estimates of the consequences of the programs are as follows. Program A: If . | Judgment in Managerial Decision Making 8e Chapter 5 Framing and the Reversal of Preferences Copyright 2013 John Wiley & Sons As noted previously, we tend to use heuristics, or rules of thumb, to reduce the complexity of our decisions. Often, these heuristics allow us to make effective decisions in a short amount of time. However, under the right set of circumstances they can also lead us into making biased decisions. Avoiding the biases that come with the use of heuristics is so difficult that even the most intelligent people are prone to error. Before introducing key biases, take a few minutes to answer the following questions. Write down your answers. 1 The Asian Disease Problem Imagine that the United States is preparing for the outbreak of an unusual Asian disease that is expected to kill 600 people. Two alternative programs to combat the disease have been proposed. Assume that the exact scientific estimates of the consequences of the programs are as follows. Program A: If Program A is adopted, 200 people will be saved. Program B: If Program B is adopted, there is a one-third probability that 600 people will be saved and a two-thirds probability that no people will be saved. Which of the two programs would you favor? Consider this problem. You have a choice between two programs. Each program is expected to save 200 people. However, Program A is certain to save 200 people while Program B has a high degree of uncertainty, as either 200 or 0 people will be saved. Because people are risk averse, they tend to favor Program A. 2 Big Positive Gamble You can (a) receive $10 million for sure (expected value = $10 million) or (b) flip a coin and receive $22 million for heads but nothing for tails (expected value = $11 million). An expected-value decision rule would require you to pick (b). What would you do? Now, consider this problem about a gamble and write down what you would do. Essentially, you can choose between a higher expected value that is uncertain or a sure .