Asked by Taryn Unhola on Jun 14, 2024
Verified
Bill feels that he possesses a good dose of "street smarts". Thus, he makes his business decisions based on how a project feels to him rather than taking the time to financially analyze a project. This type of behavior is referred to as:
A) Overconfidence.
B) Endowment effect.
C) Money illusion.
D) Affect heuristic.
E) Sentiment-based risk.
Affect Heuristic
A mental shortcut that influences decision-making based on emotions and feelings.
Street Smarts
Practical knowledge and experience in dealing with everyday situations or challenges, often contrasted with book learning.
Business Decisions
The choices made by the management of a company regarding strategic planning, operations, and policies.
- Examine the consequences of overconfidence and different biases on the choices made by managers.
- Assess the effect of frame dependence in shaping financial decisions and modifying perceptions.
Verified Answer
VV
victoriarose vendittiJun 18, 2024
Final Answer :
D
Explanation :
Affect heuristic is a mental shortcut that involves making decisions based on emotions or "gut feelings" rather than analytical reasoning, which aligns with Bill's approach of relying on how a project feels to him.
Learning Objectives
- Examine the consequences of overconfidence and different biases on the choices made by managers.
- Assess the effect of frame dependence in shaping financial decisions and modifying perceptions.