Stories vs. Statistics: The Impact of Anecdotal Data on Professional Decision Making

Abstract:     
Prior research suggests that decision makers can be biased by anecdotal data, even in the presence of more informative statistical data. However, much of that research has been conducted on non-professionals. Smith and Kida (1991) note that judgment biases are often mitigated or modified when professionals perform job-related tasks. As a result, it is unclear whether anecdotal biases will occur in professional decision making, where training, incentives, and professional duties may reduce the effects of such a bias. We conduct experiments in two different professional contexts (i.e., management decision making and auditing) and find that business professionals ignored, or underweighted, more informative statistical data in favor of anecdotal data, leading to suboptimal business decisions. In addition, we investigate whether two decision aids, judgment orientation and counter-argument, mitigate the effects of this anecdotal bias. The results indicate that both decision aids can reduce the influence of anecdotal data.

Number of Pages in PDF File: 30

Keywords: Stories vs. Statistics, Anecdotal Bias, Judgment Orientation, Counter-Argument

JEL Classification: M41, M49

working papers series