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Coolidge (CKC), a chemical manufacturer, is being sued for patent infringement. The plaintiffs are the patent holder and its sole licensee, who is also a CKC competitor. An analyst at CKC has done a breakeven decision analysis from CKC's perspective, balancing going to court with settling out of court, but no analysis has been done for the plaintiffs.

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 weighed. 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. In this article, first published in 1998, John Hammond, Ralph Keeney, and Howard Raiffa examine eight psychological traps that can affect the way we make business decisions. The anchoring trap leads us to give disproportionate weight to the first information we receive. The status quo 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 prompts 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 these mental lapses. The authors describe what managers can do to ensure that their important business decisions are sound and reliable.

Supplements the (A) case.

John Schmidt's project to convert the information system of his auto parts distribution business is in real trouble, putting his company at risk. He must decide what his decision problem is and set appropriate objectives as well as create a good set of alternatives from which to choose. This case can be used in courses on decision making as well as those that address management of information technology projects.

An insurance company claim manager is deciding how to negotiate a large liability claim and reviewing the company's approach to settling large claims. This case provides background on the claim and the 4-1/2-year history of negotiations to date. It also gives profiles of people who might be chosen to do the final negotiations. The case provides background that can be used to debate how to conclude negotiations, critique how large claims have been handled, and discuss how to manage them better in the future.

This article offers insight to any decision maker struggling with a hard choice. Making wise trade-offs is one of the most important and difficult challenges in decision making. The sheer volume of trade-offs, however, is not what makes decision making so hard. It's the fact that each objective has its own basis of comparison, from precise numbers (34% versus 38%) to relationships (high versus low) to descriptive terms (red versus blue). You're not just trading off apples and oranges; you're trading off apples and oranges and elephants. How do you make trade-offs when comparing widely disparate things? In the past, decision makers have relied mostly on instinct, common sense, and guesswork. They've lacked a clear, rational, and easy-to-use trade-off methodology. To help fill that gap, Howard Raiffa, a professor emeritus at Harvard University, John Hammond, a Boston-area consultant, and Ralph Keeney, a professor of systems management at the University of Southern California have developed a system--which they call even swaps--that provides a practical way of making trade-offs among a range of objectives across a range of alternatives. The even-swap method will not make complex decisions easy; you'll still have to make hard choices about the values you set and the trades you make. What it does provide is a reliable mechanism for making trades and a coherent framework in which to make them.

Designed to be used in conjunction with Byrnes, Byrnes & Townsend. Discusses a suit brought by a woman client who was badly injured in an automobile accident and alleges that a proximate cause of the accident was faulty repairs on her car by a Patriot-insured auto shop. Contains common information about the law, the accident, witnesses, etc., but different information about the organizational context within which each negotiator must operate.

Designed to be used in conjunction with Patriot National Insurance Co. Discusses a suit brought by a woman client who was badly injured in an automobile accident and alleges that a proximate cause of the accident was faulty repairs on her car by a Patriot-insured auto shop. Contains common information about the law, the accident, witnesses, etc., but different information about the organizational contexts within which each negotiator must operate.

Coolidge (CKC), a chemical manufacturer, is being sued for patent infringement. Plaintiffs are the patent holder and its sole licensee, who is also a CKC competitor. An analyst at CKC has done breakeven decision analysis from CKC's perspective, balancing going to court with settling out of court, but no analysis has been done for the plaintiffs.

Helps students fully capitalize on the case method. Succinctly introduces the benefits, format, and process while offering lots of "how-to" advice. Widely used as an introductory handout for executive, MBA, and undergraduate courses. Describes how case discussion enables the exchange of managerial experience and knowledge. Emphasizes the need to identify the real issues and do rigorous analysis in the course of reaching a management decision and that there is typically more than one "right" answer.

Concerns the settlement of an automobile insurance claim. A woman, blinded in an accident, alleges that approximate cause of the accident was failure by Sorensen Chevrolet to connect the left headlight of her car. The student is asked for a strategy for settling the case, to decide who is to negotiate, and to assess the handling of the case to date.

Covers events between February 1974 and September 1974.

Covers events between September and December 1974.

Describes the experience curve concept, details of its application, uses in competitive analysis, and a number of caveats and limitations.

Describes a method of competitive analysis used by the Boston Consulting Group to coordinate a portfolio of products at the corporate level. Construction and interpretation of product portfolio charts is an important aspect of the technique.

Covers events between November 1973 and February 1974.

Provides details of the mining agreement between Bougainville Copper and the government of Papua New Guinea; some historical, cultural, social, political, and economic information on Papua New Guinea; and historical and financial information on Bougainville Copper. Designed for use in negotiation planning and bargaining studies from either the government's or the company's point of view.

Maxco and Gambit are bidding for an oil lease. Gambit will soon know the value of the lease with some precision. Maxco is bidding with no such precise information. The objective is to get the student to think hard about how Gambit will bid before deciding on Maxco's strategy.

Spreadsheet Supplement for case 173003.

A simple, intuitive introduction to the usually-difficult topics of discounting and present value. While the mechanics of computing present value and internal rate of return are covered well, the emphasis is more about how to think about these concepts (for example, the earlier-the-better on the receipt of cash flows). Using concrete examples, it fosters an understanding of how various considerations influence present value (for instance, as the discount rate rises, the impact of cash flows further out in time is disproportionately diminished).