The hidden traps in decision making

Bad decisions can often be traced back to the way the decisions were made--the alternatives were not clearly defined, the right information was not collected, the costs and benefits were not accurately weighted. But sometimes the fault lies not in the decision-making process but rather in the mind of the decision maker. The way the human brain works can sabotage the choices we make. John Hammond, Ralph Keeney, and Howard Raiffa examine eight psychological traps that are particularly likely to affect the way we make business decisions: The anchoring trap leads us to give disproportionate weight to the first information we receive. The statusquo trap biases us toward maintaining the current situation--even when better alternatives exist. The sunk-cost trap inclines us to perpetuate the mistakes of the past. The confirming-evidence trap leads us to seek out information supporting an existing predilection and to discount opposing information. The framing trap occurs when we misstate a problem, undermining the entire decision-making process. The overconfidence trap makes us overestimate the accuracy of our forecasts. The prudence trap leads us to be overcautious when we make estimates about uncertain events. And the recallability trap leads us to give undue weight to recent, dramatic events. The best way to avoid all the traps is awareness--forewarned is forearmed. But executives can also take other simple steps to protect themselves and their organizations from the various kinds of mental lapses. The authors show how to take action to ensure that important business decisions are sound and reliable.     

The Relaxation of Entry Barriers in the Banking Industry: An Empirical Investigation

Until recently, state laws restricted entry into local banking markets in many states by limiting both branching and multibank holding company (MBHC) operations. To the extent that these laws impeded entry into local banking markets, the removal or relaxation of the restrictions should have reduced barriers to entry, leading to more competitive price levels in the affected markets. This paper tests for such effects by examining the changes in deposit interest rates offered by banks operating in markets affected by liberalization of state banking law relative to the changes in deposit interest rates offered during the same time period by banks operating in markets not affected by such liberalization. We find evidence that liberalization of state laws restricting intrastate MBHC operations, interstate branches, and interstate MBHC operations caused deposit interest rates to become more competitive. We, however, find no evidence of such effects associated with the removal of restrictions on intrastate branching.     

Who are these people? Personality traits and judgments about trade secret misappropriation in post‐employment activities

Trade secret theft is a problem that almost all organizations face. The greatest threat is employee mobility and potential unethical post‐employment behavior. This study investigates the role of individual personality traits in judgments about trade secret misappropriation. Our hypotheses were tested in three studies addressing three different situational contexts: current employees, employees about to be laid off, and students who had quit their job. Relationships were estimated with robust regression. The results show that some personality traits predict judgment about another person's trade secret misappropriation, and that the situational context in which individuals formulate their ethical judgment moderates the impact of personality traits on ethical judgment.     

Excise taxes,over-shifting,cross-elasticity,and tax revenue

This article examines cross-elasticity effects in excise taxation for markets characterized by monopolistic competition and over-shifting. Extending the constant elasticity demand model to consider cross-elasticity leads to notably different results regarding tax revenue maximization. With nonzero but weak cross-elasticity effects relative to the price elasticity, we derive a higher optimal tax-price ratio compared to prior research. With strong cross-elasticity, revenue can continually be increased by raising the excise tax. Overall, the study offers government greater incentive to use excise taxes to obtain revenue.     

Pedestrian traffic injuries in Mexico: A country update

Road traffic injuries in general and pedestrian injuries in particular are a major public health problem in Mexico, especially in large urban areas. Analysis of mortality and road crashes at the national level was done using routine data recorded on death certificates. Fatality rates for different age groups were estimated by region for the year 2000. These data were supplemented by a cross-sectional study of pedestrian injuries in Mexico City based on death certificates information for pedestrians who lived and died in Mexico City between 1994 and 1997. Participant observation of physical spaces where crashes occurred was carried out. The spaces were filmed and in-depth interviews of survivors conducted. Road traffic crashes were responsible for approximately 17,500 deaths in Mexico during 2000. The mean age of the victims was 37 years. Mexico lost an average of 30 years of productive life for each individual who died in a traffic crash – 525,000 years in 2000. An estimated 9500 (54.3%) of all fatalities were pedestrians, and for every pedestrian death there were 13 others who sustained nonfatal injuries requiring medical care. The overall crude mortality rate for pedestrian injuries in Mexico City was 7.14 per 100,000 (CI 6.85-7.42). A concentration of deaths was observed in 10 neighborhoods at specific types of street environments. The underlying factors included dangerous crossings and the absence or inadequacy of pedestrian bridges, as well as negative perceptions of road safety by pedestrians. In conclusion, this study demonstrates the importance of elucidating the underlying contextual determinants of pedestrian injuries.     

Attitudes toward Use of Advertising and Various Media Practices by Physicians

Advertising by physicians is a relatively recent phenomenon. The purposes of this study were to determine (a) consumers’ attitudes toward advertising by physicians; (b) whether certain potential consumer demographic variables account for any significant difference in attitudes toward physicians who advertise; and (c) which media consumers feel are appropriate for physicians’ advertising. The intent was to discover information that would be useful to physicians in planning promotional strategies and improving the quality of their advertising. The study seems to confirm the belief of many professionals that advertising and promotion clearly have a place in the future of health care services.