Chapter 8 Flashcards
(10 cards)
A recent graduate from a prestigious university receives a non-negotiable job offer of €30,000 from their preferred firm. They later discover graduates from another university are offered €33,000 for the same role. How might this discrepancy affect the graduate’s decision-making?
The graduate may feel the offer is unfair due to the unequal treatment in salaries, despite the similar qualifications. This perception of unfairness could impact their decision to accept the offer, even if career progression within the company would eventually adjust for merit.
After a natural disaster, a small building company doubles prices on high-demand materials needed for reconstruction. Is this price increase considered ethical or rational?
Many people would consider it unethical, as the company appears to be profiting from a disaster. Economically, although supply and demand would normally justify the increase, if customers perceive it as unfair, the company could lose future business, making the decision potentially irrational as well
How can fairness considerations lead to decisions that deviate from economic models?
Fairness concerns can cause employers to avoid cutting wages during high unemployment and may prevent price increases, even if demand justifies them. People’s judgments often differ from strict supply-and-demand logic, as seen in examples like snow shovels being repriced after a storm.
In a community facing recession, a company makes a small profit and decides to adjust wages. Why might a 5% wage increase be perceived more favorably than a 7% decrease, despite both being economically similar?
The 5% nominal increase feels like a gain, even though it doesn’t cover inflation, while a 7% decrease feels like an unfair loss. This reaction illustrates “money illusion,” where individuals focus on nominal rather than real values.
In the ultimatum game, why do many deciders reject offers below €20, even if it means they forfeit any monetary gain?
People prioritize fairness over personal gain; rejecting low offers allows deciders to punish proposers for what they view as unfair. This preference for fairness, or reciprocity, shows that decisions can deviate from pure economic self-interest.
How do social comparisons impact perceptions of fairness in organizational pay structures?
People care about how their rewards compare to others’. Fairness concerns may lead organizations to keep salaries confidential or establish pay scales to reduce resentment and enhance perceptions of fairness among employees.
What is “bounded ethicality,” and how can it lead to unintentional unethical behavior?
Bounded ethicality refers to biases that lead individuals to act in ways that conflict with their ethics, often without conscious intention. For instance, self-serving biases can cause someone to overclaim credit, contributing to unethical behavior in joint ventures or partnerships.
Why might disclosure of conflicts of interest sometimes increase bias rather than reduce it?
Disclosure can actually encourage bias by making individuals feel “free” to act in self-serving ways, as they believe they have been transparent. This paradox means disclosure doesn’t always lead to objective decision-making.
When offered €2 to sign a document “selling their soul,” why do many refuse, even if they don’t believe in souls?
This decision is often driven by emotion rather than reason. Even when people don’t rationally believe in “selling their soul,” the symbolic nature of the act evokes strong moral objections.
Why might someone engage in “altruistic punishment” even if it’s irrational?
People often derive satisfaction from punishing perceived unfairness, even at a personal cost. This desire to teach a lesson can outweigh purely rational self-interest, especially when addressing unfair treatment.
