| Course | MGT 464 Organizational Behavior |
|---|---|
| Module | Module 5 |
| Paper type | Decision analysis |
| Length | About 1,088 words, 6 pages |
| Format | APA 7 student paper |
| School | Aspen University |
| Program | Business Administration |
| Updated | October 2026 |
Free sample paper for MGT 464 Module 5
Forecasting From the Best Room Instead of the Average: Biases in an Escape Room Owner's Expansion Decision
Student Name
Business Administration Program, Aspen University
MGT 464: Organizational Behavior
Instructor Name
Month Day, Year
Forecasting From the Best Room Instead of the Average: Biases in an Escape Room Owner's Expansion Decision
Lockwise Escape Rooms, a composite company in Indianapolis, Indiana, operates three locations where groups of friends, families and coworkers pay about $32 per person to solve puzzles in themed rooms within an hour. Its downtown location, opened in 2021, earned $610,000 in its first year. Two later locations, in a northern suburb and near a university, earned $360,000 and $320,000 in their first years. The owner has found a vacant store in a new suburban shopping center and plans to open a fourth location. Her forecast shows first-year revenue of $620,000. She has paid a $15,000 deposit to hold the space and must sign a ten-year lease at $135,000 a year within three weeks. Her banker asked for a second look at the forecast.
How the Decision Was Made
The owner visited the shopping center after a broker called, liked the space and the anchor store nearby and began planning the next day. She did not look at other sites. The forecast began from the downtown location's first-year revenue, adjusted up slightly because the new center has more parking. She made the decision herself, quickly, as she has made most decisions for the business.
Bounded Rationality
Simon (1955) challenged the economic picture of a decision maker who knows every alternative and its consequences and picks the best. Real people, he argued, have limited information, limited time and limited capacity to compute. They therefore satisfice, searching until they find an option that meets their aspiration level and then stopping. The owner's process fits this description. The first site was acceptable, so the search ended. Satisficing is often sensible, but for a ten-year commitment, a wider search would have been worth its cost.
Heuristics and Biases
Tversky and Kahneman (1974) showed that people rely on a few mental shortcuts when judging uncertain events. Under representativeness, people judge likelihood by how much something resembles a familiar category, often ignoring base rates. The availability shortcut treats whatever is easy to recall as common. The anchoring shortcut begins from a starting number, often an arbitrary one, and moves away from it too timidly. These shortcuts usually work but produce predictable errors.
| Bias | Evidence in the plan | Check |
|---|---|---|
| Anchoring | Forecast starts from downtown's $610,000 and adjusts up | Start from the average of all locations |
| Representativeness | New site judged similar to downtown because both are busy | Compare traffic patterns: downtown draws offices and visitors, suburban centers draw families on weekends |
| Availability | Owner recalls downtown's sold-out weekends vividly | Review weekday occupancy at all locations |
| Sunk cost | $15,000 deposit cited as a reason to proceed | Treat the deposit as spent whatever is decided |
| Overconfidence | No range given; a single forecast number | Build low, middle and high cases |
A Checklist for Big Decisions
Kahneman et al. (2011) argued that leaders cannot easily see their own biases but can review recommendations for them. They proposed twelve questions, such as whether the recommendation was anchored on an initial number, whether credible alternatives were considered, whether the team is overly attached to the plan because of past success and whether a worst case was considered. Applied to Lockwise, several questions flag problems: the forecast is anchored, no alternative site was considered, the downtown success creates a halo effect and no worst case exists.
Why the Owner Decided Alone
The way the decision was made also mattered. The owner has run Lockwise as a sole decision maker since its start, and her early success downtown reinforced her confidence in her instincts. The broker's call created a sense of urgency, and the three-week lease deadline compressed the time available for analysis. Kahneman, Lovallo and Sibony note that the people who propose a plan are often the least able to see its flaws, which is why they recommend that someone other than the proposer review it. The banker's question supplied that outside view almost by accident.
What the Existing Locations Teach
Looking closely at the three locations reveals why downtown is unusual. It draws office groups on weekday evenings, tourists on weekends and private bookings from companies for team outings. The suburban location fills on Saturday afternoons with families and birthday parties but sits mostly empty on weekdays. The new shopping center, surrounded by subdivisions, resembles the suburban location far more than downtown.
A Revised Forecast
The base rate for Lockwise's own new locations is the average first-year revenue of all three, about $430,000. Suburban locations, the most similar reference group, averaged $340,000. A middle case of $430,000 and a low case of $340,000 replace the single $620,000 forecast. At $430,000, the $135,000 lease would take 31% of revenue, against about 20% at existing locations. At $340,000, the location would likely lose money.
A Good Decision Versus a Good Outcome
It is possible that the new location would match downtown's results, and the owner might then feel the review was wasted. But a decision should be judged by the quality of the reasoning at the time, not only by how it turns out. Signing a ten-year lease on a forecast with no range and no alternatives would be a poor decision even if luck made it profitable.
Recommendation
The owner should not sign the lease on its current terms. She should seek a rent of no more than about $90,000 a year, a shorter initial term with renewal options or a tenant improvement allowance, and should spend two weeks reviewing at least two other sites. The $15,000 deposit should play no role in the choice.
Limits of the Base Rate
Three locations make a small reference group, and the market has changed since 2021. The owner can strengthen the base rate by asking the shopping center for foot traffic counts and by talking with other escape room operators in suburban centers about their first years.
A Process for Next Time
For commitments over $100,000, the owner will use a short version of the checklist, build three forecast cases from the company's own data and ask her banker or an advisor to argue against the plan before she signs.
Conclusion
The expansion plan reflects normal features of human judgment: a satisficing search, an anchor on the best result and a deposit treated as a commitment. Simon's work, Tversky and Kahneman's heuristics and Kahneman, Lovallo and Sibony's checklist together reveal these patterns, and a forecast built from all three locations shows the consequences. A better lease or a better site can turn a risky commitment into a sound one.
References
Kahneman, D., Lovallo, D., & Sibony, O. (2011). Before you make that big decision. Harvard Business Review, 89(6), 50-60.
Simon, H. A. (1955). A behavioral model of rational choice. The Quarterly Journal of Economics, 69(1), 99-118. https://doi.org/10.2307/1884852
Tversky, A., & Kahneman, D. (1974). Judgment under uncertainty: Heuristics and biases. Science, 185(4157), 1124-1131. https://doi.org/10.1126/science.185.4157.1124
What the MGT 464 Module 5 instructions ask for
Individual decision making, including its limits and biases, is a key topic in Aspen's MGT 464, and the paper here commonly asks students to analyze a real decision for rationality and bias. Follow the Module 5 prompt your classroom gives; the example reviews one owner's plan. Describe the decision and how it was made. Explain the rational model and why real decision makers depart from it. Identify specific heuristics and biases with evidence from the case, quoting or describing what the decision maker did. Apply a structured review method from research. Show how correcting the biases changes the analysis. Recommend a decision process the person can use next time.
Inside the MGT 464 Module 5 example
The paper opens with Lockwise Escape Rooms, whose owner forecast a fourth location's revenue from the downtown room, her best performer. Simon's Quarterly Journal of Economics article describes decision makers who search until they find a satisfactory option rather than the best one. Tversky and Kahneman's Science article describes representativeness, availability and anchoring with adjustment. Kahneman, Lovallo and Sibony's Harvard Business Review article offers twelve questions for reviewing a recommendation, including checks for anchoring, overconfidence and sunk costs. A table lists five biases in the plan, such as anchoring on $620,000 and treating a $15,000 deposit as a reason to proceed. Using the average of all three locations' first years gives a forecast of about $430,000, at which the lease would take 31% of revenue. The recommendation is to renegotiate rent or consider a second site.
Where the marks sit in the MGT 464 Module 5 rubric
Decision analysis papers earn credit for describing the actual decision process, identifying biases with case evidence rather than lists of definitions and showing how correction changes the answer. This example ties each bias to something the owner did or said. Simon's work explains the narrow search, and Tversky and Kahneman's heuristics explain the optimistic forecast. Kahneman, Lovallo and Sibony's checklist provides a practical method. The revised forecast shows the consequences in dollars, including the share of revenue the lease would take. The recommended process is something a small business owner could actually use, with an outside reviewer built in.
MGT 464 Module 5 help: mistakes that cost marks
Bias papers often define a list of biases without showing any of them in the case. Tie each bias to specific evidence. Another weakness is stopping at diagnosis; show how a corrected analysis would differ, ideally with numbers. Explain bounded rationality as a normal feature of human judgment, not a personal failing. Use a structured review method from research. Consider base rates, such as the average result of similar past decisions. Make the recommended process practical for the decision maker's situation, including who will review the plan. Finally, distinguish between a bad outcome and a bad decision, since good processes can still produce disappointing results.
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MGT 464 Module 5 questions, answered
What does MGT 464 Module 5 usually ask for?
Aspen's MGT 464 covers individual decision making and biases in this module, so analyzing a real decision for rationality and bias is typical. Read your classroom prompt.
What is bounded rationality?
Simon's idea that people make decisions with limited information, time and mental capacity, so they satisfice, choosing the first acceptable option rather than the best.
What is anchoring?
A heuristic described by Tversky and Kahneman in which people start from an initial value and adjust insufficiently from it.
Where can I find a free MGT 464 Module 5 sample paper?
The example above reviews an escape room owner's expansion decision for biases and revises the forecast using the owner's own locations.
How can managers reduce bias in big decisions?
Kahneman, Lovallo and Sibony recommend reviewing recommendations with a checklist of questions about bias, base rates and alternatives before deciding.