Blog post 8

One of the most common biases in decision is known as framing. Executives frame their potential outcomes for their decisions. Framing bias occurs when people make a decision based on the way the information is presented, as opposed to just on the facts themselves. The same facts presented in two different ways can lead to people making different judgments or decisions.

When options are framed as potential for loss the prospect theory describes how managers may irrationally unwilling to incur loss. The idea behind loss aversion is an observed asymmetry between gains and loses. It is thought that the pain of losing is psychologically about twice as powerful as the pleasure of gaining. People are usually more likely to take risks when they know they will be losing something rather than gaining something.

In contrast to loss aversion, researchers have also observed that most decision makers are also risk takers. Individuals will most likely take a bigger/more irrational risk when the pay off is larger.

One example of being biased or ganged up on in the negotiations we participated in had to deal with the negotiation about the Jac36 model. All of the participants tended to not get along with VP of manufacturing. Because of this my group members and I were able to from coalitions against this person and have a biased feeling towards them because other people in the group had the same problems with them as I did. Unfortunately, the VP of manufacturing did not get what they wanted in this negotiation because no one was on their side.

Another example of someone falling victim would be the negotiation about the Newton School. My role as head master correlated well with the trustees (people who donate the money). The two of us formed coalitions against the faculty of the school because they wanted something different than us. Therefore, the faculty got the short end of the stick and had to stand up for themselves against two other parties.