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Locally Rational Decision Making: The Distracting Effect of Information on Managerial Performance

Author

Listed:
  • Rashi Glazer

    (Walter A. Haas School of Business, University of California, Berkeley, California 94720)

  • Joel H. Steckel

    (Stern School of Business, New York University, New York, New York 10003)

  • Russell S. Winer

    (Walter A. Haas School of Business, University of California, Berkeley, California 94720)

Abstract

This paper describes a phenomenon called "locally rational" decision-making, in which the mere presence of information may have dysfunctional consequences even if decision makers do not process the information incorrectly. Using the results from an experiment conducted with a strategic market simulation game, we find that the accessibility of information results in a disposition to focus on those components of decision-making most clearly addressed by the information. If these are not the components most closely tied to success, overall performance may in fact suffer. The decision-making process is thus "locally rational" since it may be optimal with respect to specific components of a larger plan, but globally suboptimal with regard to ultimate outcomes and for the organization as a whole. We describe the implications of the phenomenon for the use of market-related data in managerial decision-making.

Suggested Citation

  • Rashi Glazer & Joel H. Steckel & Russell S. Winer, 1992. "Locally Rational Decision Making: The Distracting Effect of Information on Managerial Performance," Management Science, INFORMS, vol. 38(2), pages 212-226, February.
    • Handle: RePEc:inm:ormnsc:v:38:y:1992:i:2:p:212-226
    DOI: 10.1287/mnsc.38.2.212
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    Cited by:

    1. Ninko Kostovski & Marjan Bojadjiev & Hari Lokvenec, 2017. "Decision Support Systems For New Project Development In Fast Moving Consumer Goods Industries," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 5, pages 4-14, October.
    2. Yuanyuan Liu & Timothy B. Heath & Ayse Onculer, 2020. "The Future Ambiguity Effect: How Narrow Payoff Ranges Increase Future Payoff Appeal," Management Science, INFORMS, vol. 66(8), pages 3754-3770, August.
    3. Browne, Glenn J. & Pitts, Mitzi G., 2004. "Stopping rule use during information search in design problems," Organizational Behavior and Human Decision Processes, Elsevier, vol. 95(2), pages 208-224, November.
    4. David Eshun Yawson, 2020. "Understanding Consumer Information Use in Small Businesses: The Determinants and Performance Outcomes," International Review of Management and Marketing, Econjournals, vol. 10(5), pages 50-62.
    5. Zhao, Yingshuai & Zhao, Xiaobo, 2015. "On human decision behavior in multi-echelon inventory management," International Journal of Production Economics, Elsevier, vol. 161(C), pages 116-128.
    6. Bruce H. Clark & David B. Montgomery, 1998. "Deterrence, Reputations, and Competitive Cognition," Management Science, INFORMS, vol. 44(1), pages 62-82, January.
    7. Bingxiao Wu, 2014. "Information Presentation and Consumer Choice: Evidence from Assisted Reproductive Technology (ART) Success Rates Reports," Departmental Working Papers 201410, Rutgers University, Department of Economics.
    8. Diamantopoulos, Adamantios & Horncastle, Stephen, 1997. "Use of export marketing research by industrial firms: an application and extension of Deshpande and Zaltman's model," International Business Review, Elsevier, vol. 6(3), pages 245-270, June.
    9. Mintz, Ofer & Gilbride, Timothy J. & Lenk, Peter & Currim, Imran S., 2021. "The right metrics for marketing-mix decisions," International Journal of Research in Marketing, Elsevier, vol. 38(1), pages 32-49.
    10. repec:dgr:rugsom:98b27 is not listed on IDEAS
    11. Bingxiao Wu, 2019. "Information presentation and consumer choice: Evidence from Assisted Reproductive Technology (ART) Success Rate Reports," Health Economics, John Wiley & Sons, Ltd., vol. 28(7), pages 868-883, July.
    12. Gerrit H. van Bruggen & Ale Smidts & Berend Wierenga, 1998. "Improving Decision Making by Means of a Marketing Decision Support System," Management Science, INFORMS, vol. 44(5), pages 645-658, May.
    13. Marcin Awdziej & Jolanta Tkaczyk, 2016. "Simulation Business Games in the Research of Marketing Managers’ Decision Making Process," International Conference on Marketing and Business Development Journal, The Bucharest University of Economic Studies, vol. 2(1), pages 82-90, July.
    14. Joel H. Steckel & Sunil Gupta & Anirvan Banerji, 2004. "Supply Chain Decision Making: Will Shorter Cycle Times and Shared Point-of-Sale Information Necessarily Help?," Management Science, INFORMS, vol. 50(4), pages 458-464, April.
    15. Diamantopoulos, Adamantios & Souchon, Anne L., 1999. "Measuring Export Information Use: Scale Development and Validation," Journal of Business Research, Elsevier, vol. 46(1), pages 1-14, September.
    16. van Bruggen, G.H. & Smidts, A. & Wierenga, B., 2000. "The Powerful Triangle of Marketing Data, Managerial Judgment, and Marketing Management Support Systems," ERIM Report Series Research in Management ERS-2000-33-MKT, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    17. Christopher Durney & Richard Donnelly, 2015. "Managing the Effects of Rapid Technological Change on Complex Information Technology Projects," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 6(4), pages 641-664, December.
    18. Voerman, J.A. & Wedel, M. & Zwart, P.S., 1998. "Export market information behaviour of SME's : the influence of firm characteristics," Research Report 98B27, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    19. Wierenga, Berend, 2011. "Managerial decision making in marketing: The next research frontier," International Journal of Research in Marketing, Elsevier, vol. 28(2), pages 89-101.
    20. Charles Abramson & Imran S. Currim & Rakesh Sarin, 2005. "An Experimental Investigation of the Impact of Information on Competitive Decision Making," Management Science, INFORMS, vol. 51(2), pages 195-207, February.
    21. van Bruggen, G.H. & Lilien, G.L. & Kacker, M., 2000. "Informants in Organizational Marketing Research," ERIM Report Series Research in Management ERS-2000-32-MKT, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    22. Berend Wierenga & Gerrit H. Van Bruggen & Richard Staelin, 1999. "The Success of Marketing Management Support Systems," Marketing Science, INFORMS, vol. 18(3), pages 196-207.

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