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Judgment in Managerial Decision Making 8e Judgment in Managerial Decision Making 8e

Judgment in Managerial Decision Making 8e - PowerPoint Presentation

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Judgment in Managerial Decision Making 8e - PPT Presentation

Chapter 8 Fairness and Ethics in Decision Making Copyright 2013 John Wiley amp Sons Accepting a Job Offer You are graduating from a good MBA program Subsequent to your discussions with a number of firms one of your preferred companies makes you an offer of 110000 a year stressing that ID: 428698

company price fairness drug price company drug fairness prices behavior dealer list pay pill people car selling interest offer

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Slide1

Judgment in Managerial Decision Making 8eChapter 8Fairness and Ethics in Decision Making

Copyright 2013 John Wiley & SonsSlide2

Accepting a Job OfferYou are graduating from a good MBA program. Subsequent to your discussions with a number of firms, one of your preferred companies makes you an offer of $110,000 a year, stressing that the amount is not negotiable. You like the people. You like the job. You like the location. However, you find out that the same company is offering $120,000 to some graduating MBAs from similar-quality schools.

Will you accept the offer? Slide3

Price IncreasesHurricane Katrina hits southern Louisiana, leaving many people homeless. For commodities such as building materials, demand is up and supply is down. This is a condi­tion that leads economists to predict an increase in prices. In fact, in the aftermath of the hurricane, a small building-supply company more than doubles its prices on many items that are in high demand, such as lumber.

Are the price increases ethical? Are they rational? Slide4

Supply and DemandA hardware store has been selling snow shovels for $15. The morning after a large snowstorm, the store raises the price to $20. Slide5

Framing and FairnessA company is making a small profit. It is located in a commu­nity experiencing a recession with substantial unemployment but no infla­tion. Many workers are anxious to work at the company. The company decides to decrease wages and salaries 7 percent this year.

A company is making a small profit. It is located in a commu­nity experiencing a recession with substantial unemployment and inflation of 12 percent. Many workers are anxious to work at the company. The com­pany decides to increase wages and salaries 5 percent this year. Slide6

Framing and FairnessA shortage has developed for a popular model of automobile, and customers must now wait two months for delivery. A dealer has been selling these cars at list price. Now the dealer prices this model at $200 above list price.

A shortage has developed for a popular model of automobile, and customers must now wait two months for delivery. A dealer has been selling these cars at a discount of $200 below list price. Now the dealer prices this model at list price. Slide7

When We Resist “Unfair” UltimatumsPeople often reject profit opportunitiesFairness considered in offersFair dictators?Dictators often allocate to others

Pay-what-you-want pricingThe persistent desire for fairnessBased on emotionsCross-culturalFairness in primatesSlide8

When We are Concerned about the Outcomes of OthersPay differentialsPay equity and product qualityPay equity in MLB teamsCEO pay differential and performance

Others’ outcomes as reference pointsAcceptability ratings versus choice behaviorJoint versus separate evaluationSlide9

Perverse Consequences of Equality NormsYou visit a car dealer and go on a test drive. You return to the salesperson’s cubicle in the showroom, ready to do a deal. The car has a list price of $18,000. After a short discussion, you offer $15,500. The salesperson counters with $17,600, you counter with $16,000, he counters with $17,200, you counter with $16,400, and he reduces his price to $16,800. You act as if you will not make another move and threaten to visit another dealership. The salesperson then says earnestly, “You look like a nice person, and I can see that you really like the car. My main concern is that you get the car that you want. I assume that you are a reasonable person, and I want to be reasonable. How about if we split the difference—$16,600?” Slide10

Why do Fairness Judgments Matter?People punish unfair behaviorsThird parties in dictator gamesSatisfaction from punishing unfair behaviorAccounting for others’ fairness perceptionsSlide11

Bounded EthicalityOverclaiming creditIn-group favoritismImplicit attitudesIndirectly unethical behavior

Pseudo-sacred valuesConflicts of interestSlide12

Overclaiming CreditOverestimating our contributionsSpouses and household workJoint venturesReducing

overclaiming by considering othersSlide13

In-Group FavoritismFavoring similar othersIndirect discriminationPositive characteristicsSocial norm enforcementConsequences

LoansLegacy admissionsSlide14

Implicit AttitudesUnconscious prejudiceThe IATImplicit attitudes predict actual behaviorFemales and social skills

Nonverbal behaviorsSpontaneous versus deliberative behaviorsLowering prejudice in societySlide15

Prescription Drug PricesImagine that a major pharmaceutical company is the sole marketer of a particular cancer drug. The drug is not profitable, due to high fixed costs and a small market size, yet the patients who do buy the drug depend on it for their survival. The pharmaceutical company currently produces the drug at a total cost of $5/pill and only sells it for $3/pill. A price increase is unlikely to decrease use of the drug, but will impose significant hardship on many users.

How ethical would it be for the company to raise the price of the drug from $3/pill to $9/pill?Slide16

Prescription Drug PricesNow imagine that, instead of raising the price, the company sold the rights to produce the drug to a smaller, lesser-known pharmaceutical company. At a meeting between the two companies, a young executive from the smaller firm says: “Since our reputation is not as critical as yours, and we are not in the public’s eye, we can raise the price five fold to $15/pill.”

Would selling the manufacturing and marketing rights to the other firm be more or less ethical?Slide17

Indirectly Unethical BehaviorImpression managementProtection of self-perceptionsSlide18

When Values Seem SacredSacred versus secular tradeoffsPaying for sexPaying for organsPaying for babiesEmotions often precede assessmentsSlide19

The Psychology of Conflict of InterestConflicts of interest bias decisionsDisclosure increases biasMotivated blindnessFinancial analyst recommendations

Major League Baseball and steroidsMolestation in the Catholic ChurchCredit-rating agenciesAddressing conflicts of interestEliminate themDisclosure is not the solutionRecognize your susceptibility to bias