The default heuristic in strategic decision making: When is it optimal to choose the default without investing in information search?

Research output: Contribution to journalArticlepeer-review

12 Scopus citations

Abstract

Many studies have shown that decision makers have a tendency to choose the default or standard action among several possible actions. The article develops a model to explore under what conditions it is optimal for a firm facing a strategic decision problem to choose the default action without investing in obtaining more information that allows a more accurate decision. The model shows that the strategy to follow the default without additional information ("the default heuristic") is more likely to be optimal when the cost of obtaining information is higher, and when the variation in possible outcomes is lower. The model also analyzes the optimal level of information search, showing that if the firm chooses to obtain information at all, it will invest in more accurate information when the cost of obtaining information is lower and when the variation in possible outcomes is lower.

Original languageEnglish
Pages (from-to)1744-1748
Number of pages5
JournalJournal of Business Research
Volume67
Issue number8
DOIs
StatePublished - 1 Jan 2014

Keywords

  • Decision models
  • Default heuristic
  • Defaults
  • Heuristics and biases
  • Information search
  • Strategic decision making

Fingerprint

Dive into the research topics of 'The default heuristic in strategic decision making: When is it optimal to choose the default without investing in information search?'. Together they form a unique fingerprint.

Cite this