What Are Some Common Errors Investors Make in Assessing the Probability

question 59

Essay

What are some common errors investors make in assessing the probability of uncertain outcomes? How did such errors reinforce the dot.com boom?

---

Definitions:

Constrained Resource

A factor that limits the output of a process or system, such as a machine, worker, or material that is in short supply.

Contribution Margin

The amount remaining from sales revenue after variable expenses are deducted, indicating how much contributes to covering fixed costs and profit.

Special Order

An order for goods or services that is outside the company's normal production routine or product range.

Resale Value

The estimated amount that an asset or good will be sold for at the end of its useful life.