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Effects of Portfolio Planning Methods on Decision Making: Experimental Results


  • JS Armstrong

    (The Wharton School - University of Pennsylvania)

  • Roderick J. Brodie

    (Department of Marketing, University of Auckland,)


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.

Suggested Citation

  • JS Armstrong & Roderick J. Brodie, 2004. "Effects of Portfolio Planning Methods on Decision Making: Experimental Results," General Economics and Teaching 0412016, EconWPA.
  • Handle: RePEc:wpa:wuwpgt:0412016
    Note: Type of Document - pdf; pages: 12

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    References listed on IDEAS

    1. 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.
    2. 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.
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    Cited by:

    1. 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.
    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 & Fred Collopy, 2004. "Effects of Objectives and Information on Managerial Decisions and Profitability," General Economics and Teaching 0412014, EconWPA.
    4. Nippa, Michael, 2011. "Zur Notwendigkeit des Corporate Portfolio Management: Eine W├╝rdigung der wissenschaftlichen Forschung der letzten vier Jahrzehnte," Freiberg Working Papers 2011,02, TU Bergakademie Freiberg, Faculty of Economics and Business Administration.

    More about this item


    decision making; marketing; portfolio planning methods;

    JEL classification:

    • A - General Economics and Teaching

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