Examples Of Bad Incentives And Bad Models Analysis

Decision making biases played a devastating role in the Deepwater Disaster. The biases that were present are; representativeness heuristic, overconfidence bias, confirmation bias and escalation of commitment bias. Based on my findings, to some extent, each of the following biases contributed to the Deepwater Disaster.

They explained that: “Changes in incentives influence human behavior in predictable ways”. The main point of this concept is that the more attractive an option is the more likely an individual to choose it. Another point that they also focused on was the fact that if a particular product more costly, the more unappealing it will become to the consumer. They used examples such as employees will worker harder if they feel that they will be greatly rewarded or a student will study material that they feel will be on an

Serious issues with incentives also include employees telling their superiors that everything is under control when it isn?t, just to save their bonus. Kohn then states that ?There are very few things that threaten an organisation as much as a hoard of incentive driven individuals trying to curry favour with the incentive dispenser? (1993, p.56).

The boat owners have interest and right in the company. The company relies on because they hire boats used by divers to acquire lobsters. The company expects continued relationship with the boat owners in order to ensure smooth operations (Freeman et al., 2010).

Were there any inappropriate risks that should not have been taken? How can these be identified and mitigated on future shipbuilding initiatives?

This project is ranked second as the possibility of investing in the speedboat with no guarantee of success can lead to massive losses. The possibility of the raceboat being a failure can result in bad publicity for Merbatty.

Sandel next adresses the concept of incentives and the way in which humans respond to them. Individuals act in order to maximize their own welfare and therefore respond things that allow them to do so; these things are known as incentives. Sandel provides us with the example of students who where offered financial incentive to do better in school. However the reaction to the incentives differed from the standard economic model. While paying students who passed AP exams did increase over all success, the results indicated that the amount of money payed made no difference in the amount of achievement. While the did serve its purpose as an incentive, the money did not act as a bribe but rather as an agent that changed the stigma associated with AP testing making it “cool” for students to do.

Risk perception was separated into those opposing constructs for this study because of previous research on the topic (Fischoff et al., 1978; Slovic et al., 2007) and the desire to have study questions that the general public could comprehend. Moreover, optimism bias has been noted in previous risk perception research (Walker et al., 2003), and the harm and benefit perception questions asked in this particular study could elicit similar biases.

In today’s society crime occurs everyday across all aspects of life. One particular crime is that of white collar and corporate level crime. It is important that we as a society study this type of crime in depth because many individuals believe that white collar and corporate level crimes are victimless crimes when in reality they have the potential to destroy major corporations and economies all with one single case. The news or media rarely talk about this type of crime because it is often difficult to understand and individuals typically lack interest in these types of cases. One particular case is that of Jordan Belfort. Dubbed the infamous “Wolf of Wall Street” Jordan Belfort is a former stockbroker who robbed investors of over $200 million dollars to create his wealth through “pump and dump” schemes, insider trading, money laundering securities fraud, and stock-market manipulation. As an attempt to further understand these complex cases I will break down Belfort’s case as far as the methods and means as to how he got started, his use of “pump and dump” schemes and other means as to how he acquired his wealth. In addition to this I will discuss the sanctions and disciplinary action that Jordan Belfort was given, how the case affected society and what new regulations were

Deepwater Horizon took a downfall due to bad decision making. What was focused on was missed warnings, bad decision making, and workers disagreements within two companies hours before the April 20 inferno that arisen upon one of the worst environmental misfortunes in US history. Judgmental heuristics were present, which are “rules of thumb or shortcuts that people use to reduce information-processing demands” (Kreitner & Kinicki, 2013, p.335). These shortcuts are knowledge obtained from past experiences that help decision makers with current problems. The overconfidence bias was also present which “relates to our tendency to be over-confident about estimates or forecasts” (Kreitner & Kinicki, 2013, p.336). BP’s and Transocean’s approach was

Many Problems in Organizations are created because of Faulty Incentives and Flawed reward systems that are setup to accomplish one thing but actually does the opposite.

Leon Festinger created the cognitive dissonance theory as an attempt to explain why people desire to have consistency between their behaviors and actions. Cognitive dissonance is the distressing mental state people feel when they find themselves doing things that don’t fit with what they know, or having opinions that do not fit with other opinions they hold (Festinger, 1957; as cited in Griffin, 2009). Thus, people are motivated to change either their behavior or their belief when feelings of dissonance arise.

According to Ricciardi (2008), the most relevant cognitive and emotional factors that influence individual risk perception, and in turn judgment and decision making process, are: heuristic, overconfidence, the concepts of loss aversion and framing – which are the tenets of prospect theory – anchoring, familiarity bias, perceived control, expert knowledge, affect feelings and worry.

The relationship between investor confidence and companies’ environmental impact was recently illustrated by the catastrophic failure of BP’s gulf coast oil rig, Deepwater Horizon. The disastrous failure of the rig’s safety features has already taken a devastating toll on the ecology of the Gulf Coast, and is likely to have harmful ramifications long into the future. The magnitude of the Deepwater Horizon disaster and the immediate and long term costs it implies for BP seems to be sinking in with BP investors as well. According to the New York Times, BP’s stock has plunged more than 13% since the incident began on April 20th. The company which operated the rig, Transocean, has seen stock prices fall by more than 14%.

Nowadays, Norway is becoming one of the biggest shipping investment platforms, thanks to the establishment of the Oslo stock exchange with its focus on value, growth and short time to market. However, before stock markets became performing enough, most Norwegian shipping projects were financed through general or limited partnerships. Even today, this particular structure is used to concentrate equity onto vessels.