Stories vs. Statistics: The Impact of Anecdotal Data on Managerial Decision Making
23 Pages Posted: 24 Mar 2010 Last revised: 10 May 2017
Date Written: March 12, 2014
Prior research suggests that decision makers can be biased by anecdotal data, even in the presence of more informative statistical data. A bias for anecdotal data can have significant implications for managers since judgments are often made when both statistical and anecdotal data are present. However, since much of the prior research has been conducted primarily on non-professionals engaged in unfamiliar tasks, it is unclear whether anecdotal biases will occur in managerial decision making, where training and professional duties may reduce the effects of such a bias. Smith & Kida (1991) note, for example, that judgment biases are often mitigated or modified when trained professionals perform job-related tasks. In this study, managers and others with significant business experience were asked to make a capital budgeting decision in the presence of both statistical and anecdotal data. The results indicate that decision makers ignored, or underweighted, statistical data in favor of anecdotal data, leading to suboptimal decisions. However, a scientific judgment orientation decision-aid did help to mitigate the effects of that bias. The implications of these results for decision making in managerial accounting are discussed.
Keywords: Anecdotal Bias, Stories vs. Statistics, Judgment Orientation
JEL Classification: M41, M49
Suggested Citation: Suggested Citation