Judgement in managerial decision making - summary
Which of the following is not likely to produce escalation of commitment?
A present decision that is likely to generate further losses.
When deciding whether or not to escalate commitment to a chosen course of action, our
choice should depend on:
The expected value of further investment.
The tendency to escalate commitment is more pronounced when:
The commitment is to a failed decision made by oneself.
The failure of the initial commitment can be explained with a causal, unrelated account.
The escalation is made by an individual, compared with escalation made by a group.
Answer: All of the above.
Which is not a good mechanism for protecting oneself from irrational escalation of
commitment?
Identify reasons for justifying the initial course of action, in order to avoid the creation of
cognitive dissonance, which ultimately leads to irrational escalation of commitment.
Which of the following is a useful advice for a competing party that wishes to avoid
competitive escalation of commitment?
Pursue mutual disclosure of intentions between you and your competitor.
Specific actions of parties engaged in competitive irrationality are:
Not easily identified as irrational.
Which of the following best describes non-rational escalation of commitment?
Commitment to a previous course of action beyond the point prescribed by rational models of
decision making.
Which of the following is an underlying mechanism of escalation of commitment?
Self-justification.
A department manager has personally decided to hire a new employee. This employee's
performance, however, proves to be below expectations. Nevertheless, the manager decides
to keep the employee, explaining away his current performance as merely part of the
learning process. This escalation of commitment may be due to:
, Perceptual biases.
Judgmental biases.
Impression management.
Answer: All of the above
True or False: In a competitive auction, continuing to bid after both one and one's
competitors have started bidding is considered irrational escalation of commitment.
False
True or False: The confirmation trap is a primary underlying bias of escalation of
commitment.
True
True or False: Escalation of commitment is more pronounced in simultaneous decisions than
in serial decisions.
False
Businesses that adjust their prices upward in response to high demand, consistent with
economic laws of supply and demand, can experience which of the following outcomes:
Underperform other businesses that consider the norms of fairness.
Are punished by customers who are more sensitive to fairness than to economic rationality.
Make larger profit than businesses that comply with norms of fairness.
Answer: All of the above
Which of the following condition can increase one's willingness to engage in altruistic
punishment?
When the person who is treated unfairly belongs to an in-group.
People display inconsistency by:
Preferring a nominal wage increase that does not cover inflation over a wage cut.
Which bias underlies the tendency of people to over-claim credit for their contribution to an
outcome?
The affect heuristic
Time discounting
Self-serving attributions
Answer: None of the above
Which of the following helps to eliminate the influence of fairness considerations?
Repeating games
Which of the following is not likely to produce escalation of commitment?
A present decision that is likely to generate further losses.
When deciding whether or not to escalate commitment to a chosen course of action, our
choice should depend on:
The expected value of further investment.
The tendency to escalate commitment is more pronounced when:
The commitment is to a failed decision made by oneself.
The failure of the initial commitment can be explained with a causal, unrelated account.
The escalation is made by an individual, compared with escalation made by a group.
Answer: All of the above.
Which is not a good mechanism for protecting oneself from irrational escalation of
commitment?
Identify reasons for justifying the initial course of action, in order to avoid the creation of
cognitive dissonance, which ultimately leads to irrational escalation of commitment.
Which of the following is a useful advice for a competing party that wishes to avoid
competitive escalation of commitment?
Pursue mutual disclosure of intentions between you and your competitor.
Specific actions of parties engaged in competitive irrationality are:
Not easily identified as irrational.
Which of the following best describes non-rational escalation of commitment?
Commitment to a previous course of action beyond the point prescribed by rational models of
decision making.
Which of the following is an underlying mechanism of escalation of commitment?
Self-justification.
A department manager has personally decided to hire a new employee. This employee's
performance, however, proves to be below expectations. Nevertheless, the manager decides
to keep the employee, explaining away his current performance as merely part of the
learning process. This escalation of commitment may be due to:
, Perceptual biases.
Judgmental biases.
Impression management.
Answer: All of the above
True or False: In a competitive auction, continuing to bid after both one and one's
competitors have started bidding is considered irrational escalation of commitment.
False
True or False: The confirmation trap is a primary underlying bias of escalation of
commitment.
True
True or False: Escalation of commitment is more pronounced in simultaneous decisions than
in serial decisions.
False
Businesses that adjust their prices upward in response to high demand, consistent with
economic laws of supply and demand, can experience which of the following outcomes:
Underperform other businesses that consider the norms of fairness.
Are punished by customers who are more sensitive to fairness than to economic rationality.
Make larger profit than businesses that comply with norms of fairness.
Answer: All of the above
Which of the following condition can increase one's willingness to engage in altruistic
punishment?
When the person who is treated unfairly belongs to an in-group.
People display inconsistency by:
Preferring a nominal wage increase that does not cover inflation over a wage cut.
Which bias underlies the tendency of people to over-claim credit for their contribution to an
outcome?
The affect heuristic
Time discounting
Self-serving attributions
Answer: None of the above
Which of the following helps to eliminate the influence of fairness considerations?
Repeating games
