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

23 Pages Posted: 24 Mar 2010 Last revised: 10 May 2017

James Wainberg

Florida Atlantic University - School of Accounting

Date Written: March 12, 2014

Abstract

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

Wainberg, James, Stories vs. Statistics: The Impact of Anecdotal Data on Managerial Decision Making (March 12, 2014). Available at SSRN: https://ssrn.com/abstract=1571358 or http://dx.doi.org/10.2139/ssrn.1571358

James Wainberg (Contact Author)

Florida Atlantic University - School of Accounting ( email )

University Tower
220 SE 2 Avenue
Boca Raton, FL 33431
United States

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