Jamey was asked to prepare a report on the estimated costs of introducing a new

Question

Jamey was asked to prepare a report on the estimated costs of introducing a new product into the market. He suggested the costs by slightly incrementing the costs the company had incurred while introducing a product into the market the previous year. This might not be accurate, because a number of other factors should also have been considered while calculating the estimated costs for the current year. This type of decision-making error is known as ________.

confirmation error

lack-of-participation error

representativeness bias

availability bias

anchoring and adjustment bias

Explanation / Answer

Jamey estimates the cost of the new product based on the last year product cost, he had not researched other factors those might have influnce on the cost of product. Jamey is adjusting the estimated product cost by anchoring the base line of previous year product cost without other factors that might have influence on the costing. Such tyoe of decision error is known as anchoring and adjustment bias. In this the desicion-maker rely on the initial information and based on theat adjust the estimates.

Correct Option: anchoring and adjustment bias

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