Question: Up until three years ago, A . C . Dime opened an average of 1 0 new retail stores a year. One of every 1
Up until three years ago, AC Dime opened an average of new retail stores a year. One of every new stores had to be closed within two years due to poor sales. This percent success ratio was fairly steady for over years. Starting three years ago, the firm has opened new stores and every one had significant profits within six months. Management believes their recent success is not just a random event and that all future stores will be profitable. Thus, the managers have decided to open a minimum of new stores each year. The managers are suffering from:Arbitrage limitationsThe clustering illusion.Aversion to ambiguity.Anchoring and adjustment.Myopic aversion.
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