Emory University, Goizueta Business School

Emory University, Goizueta Business School Emory University, Goizueta Business School

1300 Clifton Road, Atlanta, 30322, GA, US

The impact of behavioral bias on decision-making

The impact of behavioral bias on decision-making 2018-07-30
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Diwas KC

For business leaders, the ability to make critical decisions in a dynamic work and industry environment is essential to the success of an organization. However, Diwas KC, associate professor of information systems & operations management, and coauthors Francesca Gino (Harvard U) and Bradley R. Staats (UNC) note that behavioral traits can sometimes impact the ability to weigh new information and make a logical decision, even in the face of negative news. KC, Gino, and Staats analyze 147,000 choices made by cardiologists during a six-year period when they were presented with negative news from the FDA about drug-eluting stents used in angioplasty. The experienced cardiologists were more likely to continue using the questionable stents than their less-experienced peers, even after being informed of the problem. The role of influence also played a factor in the decision-making. They add, “Given that those who feel they are expert are less likely to react to negative news, those around them show the same tendency, thus making worse decisions than those in groups with less perceived expertise.” The seasoned cardiologists were better able to “generate counterexamples to the negative news and thus be susceptible to confirmation bias.” The authors note managers should be aware that more experience and the perception of expertise may bias decision-making.

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Blinded by Experience: Prior Experience, Negative News and Belief Updating

Traditional models of operations management involve dynamic decision-making assuming optimal (Bayesian) updating. However, behavioral theory suggests that individuals exhibit bias in their beliefs and decisions. We conduct both a field study and two laboratory studies to examine the phenomena in the context of health.

www.hbs.edu