All articles filed in mudu.io

Escalation of commitment occurs because of psychological factors such as perceptual and judgemental biases, as well as impression management.

Escalation can occur in bid auctions where many sellers compete with one another to offer the highest or lowest price to the buyer.

We escalate commitment because of our own previous decisions. How should be separate between rational and non-rational tendency to escalate?

Many managerial decisions concern a series of choices rather than isolated decisions. We are prone to bias when approaching decisions serially.

People place higher value on one option compared to a several options when looking at them individually. Individuals reverse their preferences.

Most people value what they own than the value of the same good that they do not own. Home sellers think their houses are worth more than most buyers do.

People have a variety of “mental” accounts that they use to organise, evaluate and keep track of a variety of financial activities such as monthly budget.

When buying a car, we purchase warranty. Vividness of repair, social norm favouring insurance and warranties leads consumers to make risk averse choices.

Under pseudo certainty effect, we are more likely to favour options that assure us certainty than those that only reduce uncertainty.

How perceived differences based on a change in the “framing” of choices can dramatically affect how people make decisions.

Initially, groups are pooled together to share information but end up spending time discussing already shared knowledge. Groups face bounded awareness.

Occurs when people look back on their own judgements and those of others. We tend to overestimate what we know beforehand based upon what we later learned.

We tend to have general bias to overestimate the probability of conjunctive events and the underestimate the probability of disjunctive events.

We often develop estimates by starting initial anchor that is based on whatever information is provided and adjust from the anchor to yield a final answer.

People naturally tend to seek information that confirms their expectations and hypothesis, even when evidence is disconfirming or falsifying.

Describes how conjunction is judged to be more probable than a single component descriptor. Intuitively thinking, something appears to be more correct.

Overconfidence effects are some of the most potent, pervasive and pernicious of any biases. It is blamed for wars, stock market bubbles, strikes, lawsuits, bankruptcy, failure of merges and acquisitions, high rates of entrepreneurial entries and other. Overconfidence facilitates many of biases. We continue to believe that our judgements and believes are correct, despite copious…

Specific emotions influence our decision making. This is an effect of positive and negative moods. Good or bad mood results in more biased judgements.

Perceptions and expectations are biased in self-serving manner. When presented with identical information, we perceive situation in different ways.