228 IndexNational Basketball Association. SeeBasketballNatural resources, tragedy of thecommons and, 175Neale, M. A., 50, 153, 159, 169, 170,173, 174, 176, 187Negative frame, of negotiator, 170Negotiated agreement, alternatives to,153Negotiation(s)anchoring in, 176–177bounded awareness in, 61claiming value in, 155–156creating value in, 156–161decision-analytic approach to,152–154descriptive models in, 178escalation of conflict and,171–172experience in, 188first offer in, 177fixed pie assumption of, 168–169framing in, 169–171identifying parties’ interests and,153–154making multiple offerssimultaneously, 164overestimating value in, 172–174pool of resources in, 160–161post-settlement settlements in,164–165primary tasks of, 154rational decision making in,151–167self-serving biases in, 174–176simultaneous, of multiple issues,163–164teaching principles of, 193Negotiation research, resolving want/should conflict with, 89Negotiator cognition, 168–178Negotiator judgment, framing of,169–171Neisser, U., 46Neuroscience, multiple selves theoryand, 85–86Ng, Z.-W., 40Nickerson, R. S., 9Nisbett, R. E., 8, 10, 34Nissan, warranty at, 70–71Nonrational escalation, elimination of,108–109Northcraft, G. B., 159, 176, 187Nosek, B. A., 128Number sequences, confirmation trapand, 28–29Nuttin, J. M., 90Oakland Athletics, transformation of,179–180Objectivity, conflicts of interest and,129–130Ochs, J., 117–118O’Connor, K. M., 81Odean, T., 37, 138, 139–140, 144, 145,146O’Donoghue, T., 87Odyssey, The (Homer), 84–85Oesch, J. M., 22, 57, 177Omission bias, 77, 123Online trading, 145–146Optimismcomparative, 91insider, 194about investments, 140–141Opt-in vs. opt-out programs, 76–77O’Reilly, C. A., 109Organ donations, availability of, 76–77Organization, mental accounting for,74Outrage heuristic, 10Outsiders, taking view of, 193–195Ovation Pharmaceuticals, ethics of,132Overconfidence, 35–37financial trading and, 138–140in negotiations, 173from positive hypothesis testing, 9Overestimation, self-enhancementand, 91–92, 92fOverplacement, self-enhancementand, 91–92Overvaluation, 159Paharia, N., 132Palaro, H. P., 137Palm, R., 20Pareto-superior agreement, innegotiations, 164, 165Park, J., 96Parker, J., 40Pashler, H., 47Patton, B., 153PECOTA (linear model), 181–182Peles, N., 141Pelham, B. W., 90Perceptionsof changes, 48self-serving bias and, 94–96Perceptual biases, 109Performance, overestimation of,91–92, 92fPerformance appraisals, availabilityheuristic in, 19Perrow, C., 179Perry, R. W., 20Persistence, misdirected, 102Perspective-taking skills, 125Peters, E., 9, 80, 85, 97Petersen, T., 21Peterson, R. S., 134Pfeiffer, T., 189Pinel, E. C., 83Plous, S., 37Politicsimpression management in,110–111joint vs. separate preferencereversals and, 80Pollan, S. M., 147Pollution. See also Environmenttragedy of the commons and, 175Positive bargaining zone, 155Positive frame, of negotiator, 170Positive hypothesis testing, 7, 8–9Positive illusions, 90–94adaptive role of, 93–94negative aspects of, 93value of, 92–94Post-settlement settlements, 164–165Predictionslinear models for, 182regression to the mean and, 25–27Preferencesjoint vs. separate reversals, 79–81reversals of, 62–83, 86Prejudice, testing of, 128Premium, insurance, 70–71Prescriptive decision making models,5Preston, E., 191Price increases, fairness and, 115–116Price offers, distribution of, 56fPrisoner dilemma game, 58–59Probabilityconjunction fallacy and, 28representativeness heuristic and,23–24of risk, 91weighting of events and, 68Procrastination, 144Professional associations, codes ofethics of, 130Professions, conflicts of interest and,129–130Profiles in Courage (Kennedy), 111Pronin, E., 95Prospect theory, 82, 144–145Pruitt, D. G., 156Pseudocertainty, 67–70Pugh, S., 129Punishmentmisconceptions about regressionand, 27of unfair treatment, 122Questioning, in value creation, 162Rabin, M., 87Radzevick, J. R., 58Raiffa, H., 3, 36, 88, 89, 152, 153, 156,164, 165, 178, 181, 182, 198Rakow, K., 171nRandom events, denying randomnature of, 141–142Random Walk Down Wall Street, A(Malkiel), 150Rational choice, fairnessconsiderations and, 114–116Rational decision making, 2–3, 82assumptions of, 5brain injuries and, 86competitive escalation paradigmand, 105–108framing and irrationality of sum ofchoices, 65–67in negotiations, 151–167unilateral escalation paradigm and,103–105Rationalization, escalation ofcommitment and, 104
Rational thinkingbounds of, 4–6about games, 55Rayo, L., 82Reagan, R., 95Real estate, estimating value in,176–177Reasoninganalogical, 191–193self-serving, 94–96Rebate/bonus framing, 78–79Recall, ease of, based on availabilityheuristic, 18–20Reference group neglect, 57Reference pointsin salary fairness, 120shifting of, 64–65, 82–83Refreezing, 191Regan, D., 95Regression to the mean, 25–27Regret avoidance, 98–99Reidl, A., 119Reifman, A., 24Reinforcement theory, 190Rensink, R. A., 48Repetto, A., 147Representativeness heuristic, 7, 8, 14base-rate insensitivity and, 21–22biases from, 21–28conjunction fallacy and, 27–28in employment interviews, 185misconceptions of chance and,23–25regression to the mean and, 25–27sample-size insensitivity and, 22–23Retirementallocation of money in plans for, 143investing for, 147–149Retrievability bias, 30for memories, based on availabilityheuristic, 20–21Reversal of preferences, 86framing and, 62–83Rewardsmisconceptions about regressionand, 27short-term, 86Richeson, J. A., 127Riskemotions and, 97gains from, 64probability of, 91reference point and, 65Risk-averse choice, 63, 67Risk neutrality, 67Risk preferences, expected value and,63Ritov, I., 77, 78, 80, 93Robins, R. W., 93Rock, I., 47Rogers, T., 75, 87Rogue Trader (Leeson), 110Rollins, H., 9Roman Catholic Church, valuepluralism and, 133Rosenthal, R., 33, 185Ross, B., 4Ross, J. M., 104, 110, 111, 179Ross, L., 8, 10, 30, 34, 37, 94, 95, 169Ross, M., 124Roth, A. E., 117–118Royalties, 159Rozin, P., 4, 96Rubin, J. Z., 104, 156Rudman, L. A., 129Rules of thumb. See HeuristicsRuss, L. E., 164Russian Roulette, 67–68Sadness, 96Safford, C., 171nSage, R. M., 97Saha, A., 137Salaries, fairness of, 119–121SALT treaty, fixed pie assumption and,169Sample size, insensitivity to, 22–23Samuels, S. M., 94Samuelson, P. A., 67, 77Samuelson, W. F., 56, 59, 60n, 143Sanfey, A. G., 118Saporta, I., 21Satisficing, 5Saunders, E. M., 98‘‘Save More Tomorrow’’ program, 148Savings, for retirement, 144, 147–148Scalia, A., 124Scandals, corporate, 122–123,134–135Schelling, T. C., 85, 86, 88Schkade, D., 10, 49, 83Schlenker, B. R., 124Schmidt, F. L., 185Schmittberger, R., 117Schnur, T., 47Schoemaker, P. J. H., 70Schoorman, F. D., 104Schroth, H., 81, 172Schwartz, J. L. K., 128Schwartz, L. M., 91Schwarz, A., 180, 182Schwarz, N., 19, 83, 98, 99Schwarze, B., 117Search strategies, availability heuristicand, 20–21Sebenius, J. K., 153, 154, 159, 171Securities and Exchange Commission(SEC), ethical issues and, 131Seeman, T. E., 97Seidel, M.-D. L., 21Self-enhancement, overestimation andoverplacement as, 91–92Self-interest, in ultimatum game,118–119Self-serving biases, in negotiation,174–176Self-serving reasoning, 94–96data viewed with, 131Seligman, M. E. P., 93Sellers, endowment effect and, 73Selvin, S., 53Sentis, K. P., 94, 176Separate preference reversals, vs. jointpreference reversals, 79–81Index 229Serial decision making, 101Shafir, E., 75Shah, P. P., 172Shakarchi, R. J., 93Sharek, Z., 184Sharpe, W. F., 137Shaughnessy, E., 9Shea, D. F., 144Shefrin, H. M., 88, 137, 143Shelton, J. N., 127Shepard, R. N., 4Sherman, D. K., 90Shiv, B., 86Shleifer, A., 137Shonk, K., 58, 76Short-term reward, 86Should/want conflict, 85–86, 87–88reconciling, 88–89Shu, L. L., 90Shubik, M., 106Sicoly, F., 124Simms, E., 91Simon, H. A., 5Simons, D. J., 47, 48Simons, J., 137Simonsohn, U., 19Sitkin, S. B., 179Slippery slope, of unethical behavior,48Slovic, P., 9, 39, 68, 69, 70, 80, 81, 85,97Small, D. A., 91, 97Smith, V., 118Snow shovel problem, 114–115Social dilemmas, 175–176Social issues, joint vs. separatepreference reversals and, 80Soll, J. B., 37Sorkin, A. R., 107, 108Spataro, S. E., 93Spence, F., 169Spitzer, E., 107Srivastava, S., 93Standard & Poor’s 500 index, 136Stasser, G., 50, 51Statisticsregression to the mean and, 25–27sample-size insensitivity and, 22–23Status quobias toward, 143–144omission bias support for, 77Staw, B. M., 103, 104, 109, 110, 111,172, 179Steers-Wentzell, K. L., 93Stereotypes, 127, 128Stewart, D., 50, 51Stiglitz, J. E., 138Stillinger, C., 169Stock marketdifficulty in predicting, 149trading in, 138Stocksinvestments and, 136–137performance of, 142Stone, A. A., 83Stone, D. N., 93Strack, F., 32, 33, 34, 39, 99, 189
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JUDGMENT INMANAGERIALDECISION MAKIN
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Dedicated toMHB: To Howard Raiffa,
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PREFACEBetween 1981 and 1983, one o
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ContentsChapter 1Introduction to Ma
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Contents ixOverestimating Your Val
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CHAPTERONEIntroduction to Manageria
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System 1 and System 2 Thinking 3di
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The Bounds of Human Rationality 5T
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Introduction to Judgmental Heuristi
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2. Are couples who marry under the
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An Outline of Things to Come 11who
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CHAPTERTWOCommon BiasesPlease read
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TABLE 2-1Chapter ProblemsCommon Bia
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Common Biases 17a. Drawing a red m
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Biases Emanating from the Availabil
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Biases Emanating from the Represent
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three flips of a coin or getting mo
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samples, scientists often grossly o
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Biases Emanating from the Represent
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Biases Emanating from the Confirmat
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Biases Emanating from the Confirmat
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Biases Emanating from the Confirmat
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Consider the following real-life sc
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Biases Emanating from the Confirmat
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Biases Emanating from the Confirmat
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TABLE 2-2 Summary of the Twelve Bia
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TABLE 3-1Chapter ProblemsRespond to
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Bounded Awareness 45Problem 6. Wit
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After showing the video the first t
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Focalism and the Focusing Illusion
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Bounded Awareness in Strategic Sett
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Bounded Awareness in Strategic Sett
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Bounded Awareness in Strategic Sett
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Bounded Awareness in Strategic Sett
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Bounded Awareness in Auctions 59th
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to have overbid, or at least not by
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Lawsuit: You are being sued for $50
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Framing and the Irrationality of th
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We Like Certainty, Even Pseudocerta
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participants who were given Version
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What’s It Worth to You? 71straig
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The Value We Place on What We Own
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Mental Accounting 75systematically
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Do No Harm, the Omission Bias, and
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Joint Versus Separate Preference Re
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Joint Versus Separate Preference Re
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Conclusion and Integration 83Given
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When Emotion and Cognition Collide
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The Impact of Temporal DifferencesW
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When Emotion and Cognition Collide
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Positive Illusions 91players or wi
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Positive Illusions 93individual’
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Self-Serving Reasoning 95attribute
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Emotional Influences on Decision Ma
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feedback on the decision not chosen
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CHAPTERSIXThe Escalation of Commitm
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The Unilateral Escalation Paradigm
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The Competitive Escalation Paradigm
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The Competitive Escalation Paradigm
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reasons. The first three classes of
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Why Does Escalation Occur? 111In h
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CHAPTERSEVENFairness and Ethics inD
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Perceptions of Fairness 115underpe
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Perceptions of Fairness 117include
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Perceptions of Fairness 119in thes
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These findings are consistent with
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Bounded Ethicality 123within firms
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Bounded Ethicality 125(Epley, Caru
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Bounded Ethicality 127implicit des
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Bounded Ethicality 129people. Inst
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Bounded Ethicality 131The results
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Bounded Ethicality 133played a pec
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Conclusion 135the classic experime
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Common Investment Mistakes 137to h
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The Psychology of Poor Investment D
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The Psychology of Poor Investment D
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The Psychology of Poor Investment D
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to taxes. From a tax perspective, w
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Action Steps 147island have been l
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choose them carefully. Some annuiti
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CHAPTERNINEMaking Rational Decision
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Together, these three sets of facts
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CLAIMING VALUE IN NEGOTIATIONConsid
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Creating Value in Negotiation 157I
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Creating Value in Negotiation 159c
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divided between negotiators. Yet, f
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The Tools of Value Creation 163The
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The Tools of Value Creation 165Typ
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Summary and Critique 167approach,
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academic programs, corporate battle
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view the negotiation with a positiv
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Overestimating Your Value in Negoti
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Self-Serving Biases in Negotiation
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