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Judgments of acceptable costs of hypothetical procurement offers as a function of success probability and profit: A vignette study
Stockholm University, Faculty of Social Sciences, Department of Psychology. (Risk Analysis, Social and Decision Research Unit)
(English)In: Psicológica, ISSN 0211-2159, E-ISSN 1576-8597Article in journal (Refereed) Submitted
Abstract [en]

This study treats procurement and judgment and decision-making using vignette scenarios in the perspective of the tenderer. It focuses on costs of creating a contract offer, risks of not winning a contract, possible profit following successful contract acceptance and the offering company’s’ size. The main hypothesis was that bidders deviate from classical economic theory. A second hypothesis was that judgments for bigger companies would allocate and accept greater maximum offer costs than smaller companies. The results showed that bidders deviated from classical EV-theory. They used a different multiplicative model for combining profit and probability, and there was no difference between responses for small and big companies. The factorial design revealed that subjective probability overestimated objective probability for low probability and underestimated greater probabilities. Finally participants were relatively more sensitive to changes in profit than to changes in probability.

Keyword [en]
Judgment, Procurement Offer, Probability, Profit, Chance
National Category
Applied Psychology
Research subject
Psychology
Identifiers
URN: urn:nbn:se:su:diva-95512OAI: oai:DiVA.org:su-95512DiVA: diva2:660591
Available from: 2013-10-30 Created: 2013-10-30 Last updated: 2017-12-06Bibliographically approved
In thesis
1. Decisions with Medium to Long-Term Consequences: Decision Processes and Structures
Open this publication in new window or tab >>Decisions with Medium to Long-Term Consequences: Decision Processes and Structures
2013 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

All of us make more or less important decisions during our entire lives, in private and professional arenas. Some decisions have consequences for an individual or organization in the short term, others have long lasting consequences. This thesis concerns studies of decision processes and structures involved indecision-making with medium to long-term consequences for an organization or individual. Study I and II focus decision-making theory and judgments in procurement. Study III concerns real-life, individual career decision-making. Study I used a laboratory context for an investigation of willingness to pay (WP) for the creation of a procurement offer. Study II investigated organizational decision processes and structures of procurement of large projects in a nuclear power plant organization. Study III investigated the decision process used to make a choice between two professional training programs leading to psychotherapist certification. Study I found, that participants used a multiplicative combination of probability and profit when judging WP for the creation of a bid. Scales of subjective probability had smaller ranges than objective probability. In this context, participants were more sensitive to variation in monetary value than to probability. In Study, II it was possible to describe the procurement process in a framework of information search and decision theory. A Multi Attribute Utility Theory-inspired model was used by the staff, in the evaluations of procurement alternatives. Both compensatory (e.g. negative aspects can be compensated by positive aspects) and non-compensatory (particular “pass” levels of attributes have to be exceeded for acceptance of a choice alternative) decision rules were used. In study III it was found that a development and extension of Differentiation and Consolidation theory described individual reasons pro and con alternatives before and after the choice of a professional training program.

Place, publisher, year, edition, pages
Stockholm: Department of Psychology, Stockholm University, 2013. 56 p.
Keyword
decision-making, decision-structure, decision-process, decision-theory, nuclear safety
National Category
Psychology
Research subject
Psychology
Identifiers
urn:nbn:se:su:diva-95260 (URN)978-91-7447-765-8 (ISBN)
Public defence
2013-12-06, David Magnussonsalen (U31), Frescati Hagväg 8, Stockholm, 10:00 (Swedish)
Opponent
Supervisors
Note

At the time of the doctoral defense, the following paper was unpublished and had a status as follows: Paper 1: Submitted. 

Available from: 2013-11-14 Created: 2013-10-24 Last updated: 2013-11-14Bibliographically approved

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