Chapter 4 Flashcards
(11 cards)
What is Bounded Awareness, and how does it influence decision-making?
Bounded Awareness refers to the inability to focus on all available information, leading to an unconscious, automatic filtering of information. This occurs because it’s cognitively impossible to pay attention to everything, meaning that important details may be overlooked, impacting decision quality.
How does Inattentional Blindness relate to Bounded Awareness?
Inattentional Blindness happens when people fail to see things they are not actively looking for, even if they are right in front of them. In business contexts, this can occur when managers focus on a specific detail and lose sight of the big picture, resulting in missed opportunities or unnoticed issues.
What is Change Blindness, and how can it impact strategic decisions?
Change Blindness is the failure to notice changes around us, especially if they happen gradually. This can affect strategic decisions, as small ethical or operational deviations may go unnoticed, leading to more significant issues over time, as seen in many financial crises.
What is the Slippery Slope effect in unethical behavior?
The Slippery Slope effect describes how minor ethical lapses can gradually lead to larger violations. Small ethical compromises become less noticeable, allowing for a buildup of lapses over time. Financial scandals often illustrate this process, where minor infractions escalate into illegal practices.
What is Focalism, and what is its impact on future perception?
Focalism is the tendency to focus excessively on a current event and overlook other simultaneous events. This can lead people to overestimate the long-term impact of present emotions, such as the euphoria after a sports victory, assuming that feeling will last indefinitely.
How does the Focusing Illusion affect information interpretation?
The Focusing Illusion occurs when people make judgments based on only part of the available information, overemphasizing what is immediately apparent and disregarding other relevant data. This can result in unbalanced decisions, where a partial view is mistakenly seen as representative.
How does Bounded Awareness manifest in group settings?
In groups, collectively discussed information significantly influences the final decision, while individually known but unshared information has little impact. Bounded Awareness prevents crucial information from being communicated, often resulting in decisions based on incomplete information.
What is the impact of Groupthink on group decision-making?
Groupthink leads individuals to set aside personal beliefs and adopt the group’s opinion. This creates a false sense of invulnerability and optimism, leading the group to make risky decisions, often disregarding relevant external information.
How can Bounded Awareness affect decisions in strategic settings, like the Monty Hall problem?
In the Monty Hall problem, participants fail to revise their initial decisions based on new information. In strategic settings, this form of Bounded Awareness can cause decision-makers to overlook critical information, resulting in suboptimal choices.
What is the “winner’s curse” in auctions, and how does it relate to Bounded Awareness?
The winner’s curse happens when auction winners tend to pay more than the item’s actual value. Bounded Awareness prevents bidders from considering why others may have bid lower, resulting in overvaluation and potential financial loss, as seen in mergers and acquisitions.
How can understanding others’ cognitive limits be advantageous?
Understanding others’ limits in attention and judgment allows one to leverage strategic advantages by anticipating competitors’ blind spots and adjusting strategies to exploit these perceptual gaps in competitive decision-making.
