Heuristics, biases and traps in managerial decision making

Peter Gál, Miloš Mrva and Matej Meško
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Peter Gál: Department of Strategy and Entrepreneurship, Faculty of Management, Comenius University in Bratislava, Odbojárov 10, P.O. Box 95, 820 05 Bratislava 25, Slovak Republic
Miloš Mrva: Department of Strategy and Entrepreneurship, Faculty of Management, Comenius University in Bratislava, Odbojárov 10, P.O. Box 95, 820 05 Bratislava 25, Slovak Republic
Matej Meško: Department of Strategy and Entrepreneurship, Faculty of Management, Comenius University in Bratislava, Odbojárov 10, P.O. Box 95, 820 05 Bratislava 25, Slovak Republic

Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 2013, vol. 61, issue 7, 2117-2122

Abstract: The aim of the paper is to demonstrate the impact of heuristics, biases and psychological traps on the decision making. Heuristics are unconscious routines people use to cope with the complexity inherent in most decision situations. They serve as mental shortcuts that help people to simplify and structure the information encountered in the world. These heuristics could be quite useful in some situations, while in others they can lead to severe and systematic errors, based on significant deviations from the fundamental principles of statistics, probability and sound judgment. This paper focuses on illustrating the existence of the anchoring, availability, and representativeness heuristics, originally described by Tversky & Kahneman in the early 1970's. The anchoring heuristic is a tendency to focus on the initial information, estimate or perception (even random or irrelevant number) as a starting point. People tend to give disproportionate weight to the initial information they receive. The availability heuristic explains why highly imaginable or vivid information have a disproportionate effect on people's decisions. The representativeness heuristic causes that people rely on highly specific scenarios, ignore base rates, draw conclusions based on small samples and neglect scope. Mentioned phenomena are illustrated and supported by evidence based on the statistical analysis of the results of a questionnaire.

Keywords: managerial decision making; heuristics; anchoring heuristics; availability heuristics; representativeness heuristics (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:mup:actaun:actaun_2013061072117

DOI: 10.11118/actaun201361072117

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