Question Overview

Two people look at the numbers for their organization, and find out that they will lose 20,000 this year. They come up with a plan to help the organization, but disagree on how to present it to their boss. One focuses on the positive and want to present the plan as following: By using the plan, there is a 35% chance that of salvaging all of the money and a 65% change of salvaging none of the money. The other one is more cautious and want to present the plan by saying: there is a 35% chance of losing none money and a 75% chance of losing all the money.

1) What choice would their boss likely make if the plan is presented as version 1? Why?

2) What choice would their boss likely make if the plan is presented as version 2? Why?

3)The organization paid 2 million for a software to help them get back on their feet a couple of years ago. There is now concerns that if nothing change the organization will be bankrupt. Despite the concerns the boss choose to not go with either plan as he thinks the software will start working. Identify what decision error the boss is making and why it happens, and apply it to the example.

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