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Effects of Portfolio Planning Methods on Decision Making: Experimental Results

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Author Info

  • JS Armstrong

    (The Wharton School - University of Pennsylvania)

  • Roderick J. Brodie

    (Department of Marketing, University of Auckland,)

Abstract

Subjects (n = 1015) working individually in the role of managers were asked to choose between investment opportunities that would either double their investment or cause the loss of half of it. Six administrators ran experiments on 27 occasions in six countries over a five-year period. Information about the BCG matrix increased the subjects' likelihood of selecting the project that was clearly less profitable. Of subjects exposed to the BCG matrix, 64% selected the unprofitable investment. Of subjects who used the BCG matrix in their analysis, 87% selected the less profitable investment.

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File URL: http://128.118.178.162/eps/get/papers/0412/0412016.pdf
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Bibliographic Info

Paper provided by EconWPA in its series General Economics and Teaching with number 0412016.

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Length: 12 pages
Date of creation: 06 Dec 2004
Date of revision:
Handle: RePEc:wpa:wuwpgt:0412016

Note: Type of Document - pdf; pages: 12
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Web page: http://128.118.178.162

Related research

Keywords: decision making; marketing; portfolio planning methods;

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References

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  1. Arkes, Hal R. & Blumer, Catherine, 1985. "The psychology of sunk cost," Organizational Behavior and Human Decision Processes, Elsevier, vol. 35(1), pages 124-140, February.
  2. Arkes, Hal R. & Dawes, Robyn M. & Christensen, Caryn, 1986. "Factors influencing the use of a decision rule in a probabilistic task," Organizational Behavior and Human Decision Processes, Elsevier, vol. 37(1), pages 93-110, February.
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Cited by:
  1. JS Armstrong & Fred Collopy, 2004. "Effects of Objectives and Information on Managerial Decisions and Profitability," General Economics and Teaching 0412014, EconWPA.
  2. Kesten C. Green & J. Scott Armstrong, 2005. "Competitor-oriented Objectives: The Myth of Market Share," Monash Econometrics and Business Statistics Working Papers 17/05, Monash University, Department of Econometrics and Business Statistics.
  3. JS Armstrong & Roderick J. Brodie, 2004. "Portfolio Planning Methods: Faulty Approach or Faulty Research? A Rejoinder to 'Making Better Decisions' by Wensley," General Economics and Teaching 0412017, EconWPA.
  4. Florin Tudor Ionescu, 2011. "Boston Consulting Group II – A Business Portfolio Analysis Matrix," International Journal of Economic Practices and Theories, Academy of Economic Studies - Bucharest, Romania, vol. 1(2), pages 65-70, September.
  5. Nippa, Michael, 2011. "Zur Notwendigkeit des Corporate Portfolio Management: Eine Würdigung der wissenschaftlichen Forschung der letzten vier Jahrzehnte," Freiberg Working Papers 2011,02, TU Bergakademie Freiberg, Faculty of Economics and Business Administration.
  6. Herbert Dawid & Marc Reimann, 2005. "Evaluating Market Attractiveness: Individual Incentives Versus Industry Profitability," Computational Economics, Society for Computational Economics, vol. 24(4), pages 321-355, June.

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