When nudges promote neutral behavior: an experimental study of managerial decisions under risk and uncertainty

Erich Renz (), Marvin M. Müller () and Kim Leonardo Böhm ()
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Erich Renz: University of Regensburg
Marvin M. Müller: Mercator School of Management, University of Duisburg-Essen
Kim Leonardo Böhm: University of Duisburg-Essen

Journal of Business Economics, 2023, vol. 93, issue 8, No 2, 1309-1354

Abstract: Abstract Managers often make decisions in situations involving risk and uncertainty. To ensure the prosperity of the company, neutral behavior is desirable in such situations. However, when evaluating future-oriented managerial actions, cognitive biases can arise that are manifested as aversions towards risky and uncertain situations, leading to non-optimal decisions. In an online experiment with a convenience sample of 298 US participants, we investigate deviations from risk- and uncertainty-neutral managerial decisions and apply neutrality-promoting behavioral interventions in a business venture setting. We find that using a recommendation nudge before as well as after making an initial decision improves individual performance to achieve higher neutrality levels. In sum, we show that in managerial decision-making processes, where experience, time, and information are often lacking, simple decision-making aids lead to better decisions.

Keywords: Behavioral experiment; Managerial decisions; Nudging; Risk aversion; Uncertainty aversion (search for similar items in EconPapers)
JEL-codes: C91 D81 D91 M21 O33 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s11573-023-01139-7

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