WHEN MAKING BAD DECISIONS BECOMES HABIT: MODELLING THE DURATION OF MAKING SYSTEMATICALLY BAD DECISIONS

Victor Dragotă

ECONOMIC COMPUTATION AND ECONOMIC CYBERNETICS STUDIES AND RESEARCH, 2016, vol. 50, issue 1, 123-140

Abstract: Most part of the models in economics and finance assume that, in general, deciders make good decisions, and bad decisions occur only as exception. This paper analyses some conditions in which bad decisions are made systematically and proposes a model for the estimation of the duration of making systematically bad decisions. Even if individuals are making systematically bad decisions, they can remain in power in many organizations for a long period. Based on Monte Carlo simulations, this paper proves that, in some circumstances, the duration of making systematic bad decisions can be very long.

Keywords: decision-making; homogeneous behaviour; rationality; corporate finance; decisional abilities; behavioural finance. (search for similar items in EconPapers)
JEL-codes: G30 L21 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:cys:ecocyb:v:50:y:2016:i:1:p:123-140

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