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The risk of algorithm transparency: How algorithm complexity drives the effects on the use of advice

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  • Cedric A. Lehmann
  • Christiane B. Haubitz
  • Andreas Fügener
  • Ulrich W. Thonemann

Abstract

Although algorithmic decision support is omnipresent in many managerial tasks, a lack of algorithm transparency is often stated as a barrier to successful human–machine collaboration. In this paper, we analyze the effects of algorithm transparency on the use of advice from algorithms with different degrees of complexity. We conduct a set of laboratory experiments in which participants receive identical advice from algorithms with different levels of transparency and complexity. Our results indicate that not the algorithm itself, but the individually perceived appropriateness of algorithmic complexity moderates the effects of transparency on the use of advice. We summarize this effect as a plateau curve: While perceiving an algorithm as too simple severely harms the use of its advice, the perception of an algorithm as being too complex has no significant effect. Our insights suggest that managers do not have to be concerned about revealing algorithms that are perceived to be appropriately complex or too complex to decision‐makers, even if the decision‐makers do not fully comprehend them. However, providing transparency on algorithms that are perceived to be simpler than appropriate could disappoint people's expectations and thereby reduce the use of their advice.

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  • Cedric A. Lehmann & Christiane B. Haubitz & Andreas Fügener & Ulrich W. Thonemann, 2022. "The risk of algorithm transparency: How algorithm complexity drives the effects on the use of advice," Production and Operations Management, Production and Operations Management Society, vol. 31(9), pages 3419-3434, September.
  • Handle: RePEc:bla:popmgt:v:31:y:2022:i:9:p:3419-3434
    DOI: 10.1111/poms.13770
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    2. Mathieu Chevrier & Brice Corgnet & Eric Guerci & Julie Rosaz, 2024. "Algorithm Credulity: Human and Algorithmic Advice in Prediction Experiments," GREDEG Working Papers 2024-03, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France, revised Dec 2024.
    3. Kosgoda, Dilina & Perera, H. Niles & Aloysius, John, 2024. "Effective goal framing for managers using inventory management systems," European Journal of Operational Research, Elsevier, vol. 316(1), pages 138-151.
    4. Bachler, Sebastian & Haeussler, Stefan & Momsen, Katharina & Stefan, Matthias, 2024. "Do people willfully ignore decision support? Evidence from an online experiment," VfS Annual Conference 2024 (Berlin): Upcoming Labor Market Challenges 302404, Verein für Socialpolitik / German Economic Association.

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