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| |+ {{table number|1}}Biases affecting risk decisions | | |+ {{table number|1}}Biases affecting risk decisions |
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− | ! Type of Bias | + | ! Type of Bias || Common Example |
− | ! Common Example
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− | | Framing effects | + | | Framing effects || Decision makers will take a greater gamble to avoid a loss than to make an equal gain |
− | | Decision makers will take a greater gamble to avoid a loss than to make an equal gain | |
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− | | Existence of prior account | + | | Existence of prior account || Decision makers are more inclined to take a risk at the beginning of a project than later in the project's life |
− | | Decision makers are more inclined to take a risk at the beginning of a project than later in the project's life | |
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− | | Maintaining a consistent frame of reference | + | | Maintaining a consistent frame of reference || Decision makers are more likely to invest during a run of good fortune and less likely to invest during a run of bad fortune |
− | | Decision makers are more likely to invest during a run of good fortune and less likely to invest during a run of bad fortune | |
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− | | Probability of success | + | | Probability of success || A venture having a perceived high chance of success is preferred over a second venture having a low chance of success, even though the expected value of the second venture is clearly superior |
− | | A venture having a perceived high chance of success is preferred over a second venture having a low chance of success, even though the expected value of the second venture is clearly superior | |
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− | | Wrong action versus inaction | + | | Wrong action versus inaction || Managers avoid criticism by not making a decision rather than taking action that could result in the same loss |
− | | Managers avoid criticism by not making a decision rather than taking action that could result in the same loss | |
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− | | Number of people making the decision | + | | Number of people making the decision || Groups are more prone to take risks than are individuals |
− | | Groups are more prone to take risks than are individuals | |
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− | | Workload and venture size | + | | Workload and venture size || Large volume ventures are preferred over smaller ones, especially when decision makers are busy |
− | | Large volume ventures are preferred over smaller ones, especially when decision makers are busy | |
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− | | Personal familiarity | + | | Personal familiarity || The “comfort bias”: decision makers are more risk prone in deals or environments with which they have had past good experience |
− | | The “comfort bias”: decision makers are more risk prone in deals or environments with which they have had past good experience | |
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