Producing (or constructing) strategic decision entails numerous cognitive and other bounds on human rationality, which often cause systematic errors and biases. Yet among the economic and management models used in strategic planning, few try to explain why decision makers remain so stubbornly and extravagantly irrational, ignoring logic, principle of optimization, and even postulated self-interest. One explanation may be the difficulty of extending methods used to study individual choice and decision-making behavior to dynamic group settings. This experimental analysis assessed the impact of cognitive simplification processes on the performance of 118 graduate business students who worked in a simulated strategic context. Randomly assigned to twenty-four teams, the subjects run international conglomerates with multiples actors, feedback loops, non-linearities and time lags and delays. The teams’ interaction, expectations, choice and model selection produced results that systematically diverged over time. Within a crossed factorial design, these results support the hypothesis that cognitive biases interact with strategic management models to influence performance. Poor performers chose models that reinforced their cognitive limits and bounds. Conversely, good performers constructed models which helped them recognize and overcome the negative effects of cognitive simplification processes. They produced effective decisions, not by optimizing functions, but through searching for recognizable patterns when they received feedback.

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Date created

• 1990

Type

• Document

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• Processing documentation available at: https://wiki.albany.edu/display/SCA/Processing+Ingested+Digital+Files

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• Creative Commons BY-NC-ND Attribution-NonCommercial-NoDerivs 4.0 International

  
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386b7d5fcd17a644199db727913a7a7a

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e3ebd4855fa658877b17f518e29a6ac9

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23d738ba88f8333bc39725f9cb5bd0b8

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Collection

System Dynamic Society Records

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Collecting area

• This collection is part of the University Archives