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When nudges promote neutral behavior: an experimental study of managerial decisions under risk and uncertainty

Author

Listed:
  • Erich Renz

    (University of Regensburg)

  • Marvin M. Müller

    (Mercator School of Management, University of Duisburg-Essen)

  • Kim Leonardo Böhm

    (University of Duisburg-Essen)

Abstract

Managers often make decisions in situations involving risk and uncertainty. To ensure the prosperity of the company, neutral behavior is desirable in such situations. However, when evaluating future-oriented managerial actions, cognitive biases can arise that are manifested as aversions towards risky and uncertain situations, leading to non-optimal decisions. In an online experiment with a convenience sample of 298 US participants, we investigate deviations from risk- and uncertainty-neutral managerial decisions and apply neutrality-promoting behavioral interventions in a business venture setting. We find that using a recommendation nudge before as well as after making an initial decision improves individual performance to achieve higher neutrality levels. In sum, we show that in managerial decision-making processes, where experience, time, and information are often lacking, simple decision-making aids lead to better decisions.

Suggested Citation

  • Erich Renz & Marvin M. Müller & Kim Leonardo Böhm, 2023. "When nudges promote neutral behavior: an experimental study of managerial decisions under risk and uncertainty," Journal of Business Economics, Springer, vol. 93(8), pages 1309-1354, October.
    • Handle: RePEc:spr:jbecon:v:93:y:2023:i:8:d:10.1007_s11573-023-01139-7
    DOI: 10.1007/s11573-023-01139-7
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    More about this item

    Keywords

    Behavioral experiment; Managerial decisions; Nudging; Risk aversion; Uncertainty aversion;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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