MGMT 371 Quiz 3

One explanation for why people are biased when making responsibility assessments (i.e., judging contributions to a project) is called "differential accessibility". Explain what that means
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1) The Lake Wobegon Effect is when everyone within a referent group thinks: "I'm above average!" on desirable traits or characteristics
2) A sample example is, In a sample, 80% of drivers believe that they are above-average drivers in comparison to other drivers
3) Another explanation for the lake Wobegon effect is that we believe we're better than we really are in terms of desirable qualities.
CEO compensation goes up over time because boards want an "above average" CEO for their companies. They don't want to pay the average for such an important job, so they set the average higher and higher throughout the years. Each time they decide to hire an "above average" CEO, they think they need to pay more, so compensation spirals upwards.
This does not reflect the Lake Wobegon Effect because they actually could in fact be above average. Doctors are above average in many ways, however, doctors cannot all be above average relative to eachother.
I would change it so for example that 80% of a random survey of doctors believe themselves to be above-average doctors.
One study of chief financial officers found that in making over 13,000 one-year and ten-year predictions about the S&P 500 return, "the executives demonstrated severe overprecision—their 80% confidence intervals contained the true value only 36% of the time." EXPLAIN what this means by relating those CEO results to what YOU did on the "overconfidence quiz" (that we discussed in class where I gave you the quiz answers).
This means that overconfidence is a real phenomenon with very costly outcomes. Like the CEOs, the quiz we took in class required us to make a prediction. We made a prediction between two intervals that we felt certain about. However, much like the CEOs, I was wrong on my predictions more often than I was correct, demonstrating overconfidence. (elaborate more on what I did)
Acquisition Premiums are the ratio of the ultimate price paid per target share divided by the price prior to takeover news" and are "major statements by acquiring managers of how much additional value they can extract from the target firm." The study measured CEO hubris through three indicators; 1.) the recent performance of the acquiring firm 2.)the recent media praise for the acquiring firm 3.) a measure of the CEO's self-importance
Input bias refers to the systematic misuse of input information in judgments of outcome quality. One example that illustrates input bias is, a law firm rewarding lawyers for the number of hours billed. This illustrates input bias because Just because a lawyer has put in a lot of hours, doesn't necessarily mean that the customer was satisfied or the work done was efficient.
83 participants were asked to rate the quality of the presentations. One group was told that the electronic ink's preparation time was 8 hours and the optical switch's preparation time was 37 minutes. They then manipulated the order and told the other half of the group the opposite. The results ended up being that whichever presentation was said to have taken more time was rated better.
. As an HR manager, you hired someone who finished jail time for stealing. Your intuition told you that he'd work out, but three months later he was caught stealing from the firm, and now your boss is mad at you. What does the HINDSIGHT BIAS say about your boss's opinions about hiring this guy today versus what she probably would have said three months ago (and why)?
The hindsight bias is a psychological phenomenon in which one becomes convinced they accurately predicted an event before it happens. Now that he has stolen again, your boss's estimate of the probability he would steal again will be exaggerated today compared to three months ago. So today it's clearly considered a mistake, and the element of risk when he was hired is ignored and downplayed.
In a quote, chess legend Garry Kasparov discussed the problem of "analyzing to the result." Explain what this involves, AND how it illustrates a key decision bias that we talked about (and name that bias).This quote explains hindsight bias. He explains that if we know the outcome of a chess game, we should analyze the moves or processes that led to the outcome as objectively as possible. This is because someone could have made the right decisions the whole time but then made a mistake at the last minute and lost the chess game. Likewise, someone could only make bad decisions and mistakes but end up winning the game. When analyzing the result, we need to analyze the process objectively which will lead to the result.