Biases In Decision Making

MANAGERIAL BIASES BY BHAVESH BRUNICA DEEPAK KANE KIRAN LISETTE MONICA GROUP - 3

OUR TOPICS . . . Escalation of Commitment Bias Hindsight Bias Self Serving Bias Sunk Costs Bias Randomness Bias

Escalation of Commitment Bias Definition

Tendency to invest additional resources in an apparently losing proposition, influenced by effort, money, and time already invested The term is also used to describe poor decision-making in business, government, information systems in general, software project management in particular, politics, and gambling Ex-1 United States commitment to military conflicts Ex-2 when parties engage in a bidding war

Hindsight Bias Definition

It is the inclination to see events that have occurred as more predictable than they in fact were before they took place. It has been shown that examining possible

alternatives may reduce the effects of this bias.

Self Serving Bias Definition

It occurs when people attribute their successes to internal or personal factors but attribute their failures to situational factors beyond their control The term "self-serving bias" is most often used to describe a pattern of biased causal inference, in which praise or blame depend on whether success or failure was achieved Ex-1 A student who gets a good grade Ex-2 In Workplace

Sunk Costs Bias Definition

These are costs that cannot be recovered once they have been incurred Sunk Costs greatly affect the decisions, because humans are inherently loss aversive and thus normally act irrationally when making economic decisions Ex-1 Pre-ordering movie tickets Overly optimistic probability

bias

Randomness Bias It’s the tendency people have to seek patterns where

none exist and to invent the existence of unjustified causal relationships. In simple terms, it’s the tendency of people to make

sense out of events which are so random in nature that not enough should be read into them.

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