Managing Biases in Strategic Judgment Essay

1726 Words Jul 10th, 2012 7 Pages
SEP 2012 Managing Biases in Strategic Judgment

Managing Biases in Strategic Judgment

Professor Ilya Strebulaev

© Ilya Strebulaev 2012

SEP 2012 Managing Biases in Strategic Judgment

© Ilya Strebulaev 2012

SEP 2012 Managing Biases in Strategic Judgment

Heuristics and Rules of thumb
• People rely on various heuristics when making most decisions
–Evolutionary reasonable strategy –Helpful but can lead to severe errors –Can result in biases –People are unaware of using heuristics most of the time –Why important to understand

• Can correct/debias yourself • Understand what others are doing in deciding on your actions/strategies

• Example: Recognition heuristic

–Which city has a large population

• Detroit vs
…show more content…
–Pervades decision-making at all levels of organizations –The single most dangerous bias

© Ilya Strebulaev 2012

SEP 2012 Managing Biases in Strategic Judgment

The confirmation heuristic
There are about 150 SEP participants this year. I am interested in obtaining your estimate of how many of them have ever visited New Zealand. Do you think the correct estimate is less than 10 participants?  Yes, I believe less than 10 participants have ever visited New Zealand  No, I believe more than 10 participants have ever visited New Zealand And now, what is your estimate of the number of participants who have ever visited New Zealand. (enter your estimate, a number between 0 and 150)

© Ilya Strebulaev 2012

SEP 2012 Managing Biases in Strategic Judgment

The confirmation heuristic
There are about 150 SEP participants this year. I am interested in obtaining your estimate of how many of them have ever visited New Zealand. Do you think the correct estimate is less than 50 participants?  Yes, I believe less than 50 participants have ever visited New Zealand  No, I believe more than 50 participants have ever visited New Zealand And now, what is your estimate of the number of participants who have ever visited New Zealand. (enter your estimate, a number between 0 and 150)

© Ilya Strebulaev 2012

SEP 2012 Managing Biases in Strategic Judgment

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