Cognitive Biases in Decision Making
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Questions and Answers

Which characteristic is NOT associated with an effective decision-making process?

  • Encourages gathering relevant information
  • Logical and consistent reasoning
  • Blends analytical with intuitive thinking
  • Focuses only on objective data (correct)

    • What is a key habit of highly reliable organizations (HROs)?

  • They are never influenced by their previous successes. (correct)
  • They think of limits as a failure to innovate.
  • They solely rely on upper management for decisions.
  • They avoid complexity at all costs.

    • In an effective decision-making process, the recognition of limits involves which of the following?

  • Ignoring potential challenges.
  • Anticipating both possibilities and the challenges ahead. (correct)
  • Embracing all complexities without caution.
  • Strictly adhering to established procedures without deviation.

    • Which of the following is a recommended approach for dealing with unexpected circumstances in decision-making?

    <p>Allow unexpected circumstances to dictate the outcome.</p> Signup and view all the answers

    When utilizing an effective decision-making process, one should prioritize which of the following?

    <p>Focus on what is important and relevant.</p> Signup and view all the answers

    What behavioral tendency do individuals exhibit when faced with potential gains?

    <p>They exhibit risk aversion.</p> Signup and view all the answers

    In competitive negotiations, what common mistake may lead negotiators to overlook cooperative opportunities?

    <p>Zero-sum thinking</p> Signup and view all the answers

    How does the framing effect influence decision-making in contexts involving loss and gain?

    <p>The way outcomes are framed can alter preferences significantly.</p> Signup and view all the answers

    What is a potential consequence of the winner's curse during negotiations?

    <p>Underestimating the opponent's capabilities.</p> Signup and view all the answers

    Which strategy can help alleviate the issues caused by the fix pie assumption in negotiations?

    <p>Seeking creative alternatives that benefit both parties.</p> Signup and view all the answers

    What characteristic of the framing effect makes it more powerful in influencing decisions?

    <p>It relies on emotional rather than logical reasoning.</p> Signup and view all the answers

    What is a recommended strategy to counteract overconfidence during negotiations?

    <p>Obtain objective assessments from experts.</p> Signup and view all the answers

    What is a common outcome of individuals feeling overconfident during negotiations?

    <p>They tend to overpay for assets.</p> Signup and view all the answers

    Study Notes

    Cognitive Biases

    • Framing Effect: Decision preferences shift based on how a problem is presented (framed). A loss-framed reward is more impactful than a gain-framed one. This contrasts traditional economic models which assume rational decision-making. People are more motivated by potential loss than gain.
    • Fix-Pie Assumption: Implies that a win for one party in a negotiation means a loss for the other, favoring competition over cooperation. This limits ability for compromise. Negotiations can lead to distributive bargaining, a mistake that is easier to commit compared to an integrative approach.
    • Winner's Curse: A bias where a party with better information often overvalues an offer, ultimately overpaying and feeling exploited. A key factor is undervaluing the opposing party’s information, leading to overconfidence and less compromise.

    Strategies to Mitigate

    • Framing Effect: Consider potential gains and losses for all involved. Frame suggestions in a way that highlights benefits for all parties.
    • Fix-Pie Assumption: Challenge the “win-lose” mindset, explore creative solutions, and consider alternative approaches like cash payments.
    • Winner's Curse: Gain expertise (or seek external input) to balance information. Seek objective assessments to counteract overestimation of your own value.

    Effective Decision-Making

    • Process: Prioritize important elements, be logical and consistent, combine analytical and intuitive approaches, gather only necessary info and opinions, and use a dependable method. This method should be easy-to-use and flexible.
    • HROs (Highly Reliable Organisations): Do not rely solely on past success, empower frontline experts, adapt to unexpected conditions, accept complexity, and understand limitations.

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    Description

    Explore the various cognitive biases that influence decision-making, including the framing effect, the fix-pie assumption, and the winner's curse. Understand how these biases impact negotiations and strategies for mitigating their effects. This quiz will help you recognize the importance of framing in decisions and improve your negotiation skills.

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