Using a Framework to Create Better Choices

6 Pages Posted: 30 May 2017

See all articles by Bidhan L. Parmar

Bidhan L. Parmar

University of Virginia - Darden School of Business

R. Edward Freeman

University of Virginia - Darden School of Business

Andrew Wicks

University of Virginia - Darden School of Business

Jared D. Harris

University of Virginia - Darden School of Business

Jenny Mead

University of Virginia - Darden School of Business

Abstract

Intuition can be a good guide for decision making when the current situation generally matches the situations in which the intuition was formed. But for novel or ambiguous situations, relying only on intuition can blind us to possible negative consequences by focusing our attention only on data that support our intuition. To reduce the likelihood of these errors and to better imagine and prepare for the outcomes of our choices, we use a decision-making framework. This note outlines the process of how to apply a framework.

Excerpt

UVA-E-0407

Jan. 5, 2016

Using a Framework to Create Better Choices

Yi Jao, a product manager at an online travel agency, has to decide whether to pursue a potentially lucrative but controversial idea. Recently, an internal team proposed revising the online pricing algorithm to use the cookies from customers' web browsers in order to customize flight and hotel pricing. Because a customer's level of disposable income can be easily inferred from his or her online habits; a travel agency could then use this information to charge from 10% to 30% more for a flight or a hotel. Given the high volatility in flight and hotel prices, it would be almost impossible for customers to trace these price increases back to the booking agency. Jao wants to increase revenue for the company and increase her bonus, but she is also concerned about the fairness of this practice and about violating customer privacy norms.

Typically, decision makers in Jao's position feel conflicted and uncomfortable when faced with this type of decision and try to make it as quickly as possible relying only on intuition. Perhaps Jao has competing intuitions and her stronger intuition leads her to pursue the customized pricing algorithm. This decision might have unintended but problematic consequences. For example, perhaps an employee who leaves the company reveals the pricing algorithm to the press, possibly creating a public relations nightmare for the company.

Intuition, which comes from our experiences, is a shortcut to making decisions. It can be a good guide for decision making when the current situation generally matches the situations in which the intuition was formed. But for novel or ambiguous situations, relying only on intuition can blind us to possible negative consequences by focusing our attention only on data that support our intuition.

. . .

Keywords: unfair pricing, online habits, four traditions of ethics

Suggested Citation

Parmar, Bidhan L. and Freeman, R. Edward and Wicks, Andrew and Harris, Jared D. and Mead, Jenny, Using a Framework to Create Better Choices. Darden Case No. UVA-E-0407. Available at SSRN: https://ssrn.com/abstract=2974203

Bidhan L. Parmar (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

R. Edward Freeman

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
804-924-0935 (Phone)
804-924-6378 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/freeman.htm

Andrew Wicks

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

HOME PAGE: http://www.darden.virginia.edu/faculty/wicks.htm

Jared D. Harris

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

HOME PAGE: http://faculty.darden.virginia.edu/harrisj

Jenny Mead

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

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