Judgment in Managerial Decision Making, 8th Edition

CHAPTER EIGHT

Fairness and Ethics in Decision Making

You are graduating from a good MBA program. Subsequent to your discussions with a number of firms, one of your preferred companies makes you an offer of $110,000 a year, stressing that the amount is not negotiable. You like the people. You like the job. You like the location. However, you find out that the same company is offering $120,000 to some graduating MBAs from similar-quality schools. Will you accept the offer?

Hurricane Katrina hits southern Louisiana, leaving many people homeless. For commodities such as building materials, demand is up and supply is down. This is a condition that leads economists to predict an increase in prices. In fact, in the aftermath of the hurricane, a small building-supply company more than doubles its prices on many items that are in high demand, such as lumber. Are the price increases ethical? Are they rational?

In the first story, many of our students are very bothered by the difference between their salary offer and the salary offers of others, even if they learn that the difference does not predict how the company will treat them in the future. In the second story, most people believe that it is not ethical for the company to raise its prices on high-demand items. Since many customers can be predicted to react negatively to the perceived unfairness of the price increase, it may not even be rational for retailers to raise their prices in response to temporary increases in demand, regardless ...