Question

discuss and provide some examples of emotional decision making of market participant.

Answer 1

Decision making is a conscious process where an outcome is based upon choosing between alternatives. All individuals have different preferences that vary between there thinking and feeling. There is a varied decision making that is based upon emotions rather then logics. A completely emotion based decision is usually very fast which is reactive in nature and is largely subconscious. Emotional decision making must generally be avoided or at least must be based upon certain amount of logic so as to ensure that outcome of the decision is fruitful.

One example of emotional decision making could be that a Business Tycoon continues operating a particular loss making plant of his large empire only because it was the first manufacturing plant that was set-up by his Father when he started the business. The logic would dictate that such plant should be closed but the emotion attached with that manufacturing plant takes over while making the decision.

Another example of emotional decision making would be to appoint One’s Son/Daughter the head of a Political party just to continue the Family’s lineage even though much experienced and qualified members are present within the party for this job. Such emotional decision makings could lead to a disastrous outcomes for an individual or an organization as a whole.