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Intuitive Prediction: Biases and Corrective Procedures
Abstract
This paper presents an approach to elicitation and correction of intuitive forecasts, which attempts to retain the valid component of intuitive judgments while correcting some biases to which they are prone. This approach is applied to two tasks that experts are often required to perform in the context of forecasting and in the service of decision making: the prediction of values and the assessment of confidence intervals. The analysis of these judgments reveals two major biases: non-regressiveness of predictions and overconfidence. Both biases are traced to people's tendency to give insufficient weight to certain types of information, e.g., the base-rate frequency of outcomes and their predictability. The corrective procedures described in this paper are designed to elicit from experts relevant information which they would normally neglect, and to help them integrate this information with their intuitive impressions in a manner that respects basic principles of statistical prediction.
... Estas falacias fueron descubiertas por Tversky y Kahneman (1971). Para más estudios véase: Kahneman, D. y Tversky, A. (1979). lntuitive prediction: Biases and corrective procedures. ...
... quiere obtener más información sobre estos elementos mentales distorsionadores le remito a:Kahnemann, D. (2015). Pensar rápido, pensar despacio,Kahneman, D. y Tversky, A. (1979). lntuitive prediction: Biases and corrective procedures. ...
¿Qué consecuencias morales y epistemológicas tendría la aplicación de los resultados
obtenidos en las últimas investigaciones de Kahneman en nuestra comprensión de la
raison d’être de la evaluación académica? Las implicaciones filosóficas de su obra
redefinen los fundamentos de las “calificaciones académicas” y nos invitan a reflexionar
sobre nuestras propias inconsistencias, sobre nuestra responsabilidad y sobre nuestra vida.
Este pequeño escrito puede formularse como una búsqueda del significado de la
evaluación: su por qué y su cómo.
Kahneman establece que se da una falta de intersubjetividad en cuestiones como las
calificaciones académicas, los diagnósticos o las sentencias. Piensa que esto se debe a
ciertos factores cognitivos que distorsionan nuestros juicios y afectan a nuestras
decisiones. Si en un conjunto de profesores de una misma materia existe una falta de
acuerdo en torno a la calificación de una prueba de evaluación idéntica, entonces, ¿cómo
podemos justificar la validez y fiabilidad de la evaluación? En este trabajo nos
aproximaremos a este problema, relativo a las calificaciones académicas, desde varias
disciplinas, como la psicología y la filosofía, tomando en cuenta ejemplos proporcionados
por diversas áreas, como la computación, la filosofía de la mente y la inteligencia
artificial.
What moral and epistemological consequences would the application of the results
obtained in Kahneman’s latest research have on our understanding of the raison d’être of
academic evaluation? The philosophical implications of his work redefine the foundations
of ‘academic grading’ and invite us to reflect on our own inconsistencies, our
responsibility, and our lives.
This brief writing can be framed as a quest for the meaning of academic grading: its
reason and its manner.
Kahneman posits that there is a lack of intersubjectivity in matters such as academic
grading, diagnoses, or judgments. He believes this is due to certain cognitive factors that
distort our judgments and affect our decisions. If there is a lack of agreement among a
group of teachers in the same subject regarding the grading of an identical evaluation test,
then how can we justify the validity and reliability of such assessments? In this work, we
will approach this problem, concerning academic grading, from disciplines such as
psychology and philosophy, considering examples provided by diverse areas including
computing, philosophy of mind, and artificial intelligence.
... We focus on IBIS's ability to predict future purchasing, comparing it with a measure of purchase intent. Purchase intent captures only a subset of respondents' beliefs (Zaller 1992) and is subject to a range of biases and inaccuracies (e.g., Kahneman and Tversky 1979;Morwitz et al. 2007;Roese and Vohs 2012). Given these limitations, new measures that improve the prediction of brand-relevant behavior would be a useful contribution, especially a measure like IBIS that should broadly tap closeness and emotional appeal without requiring respondents to introspect on motivation. ...
... Purchase intent measures are a snapshot of attitudes, expressed at a given moment in the context of a survey, and thus reflect only a subset of potentially relevant beliefs (Zaller 1992). Moreover, various biases, such as the planning fallacy (Kahneman and Tversky 1979), distort predictions of behavior in consistent ways. Linking individual respondents' attitudes and behaviors to group-level financial outcomes rarely yields the granularity needed to understand processes at the individual level. ...
Predicting future consumer behavior is a core objective of marketing research. However, it is an elusive target, typically measured by highly imperfect proxies. Here, we test a measure adapted from self-expansion theory, Inclusion of Brand in Self (IBIS), that uses a single item to assess the degree to which a brand is incorporated into a consumer’s sense of self. In three studies, we demonstrate that IBIS significantly predicts future consumption and purchase. IBIS was at least as strong a predictor as purchase intent, sometimes even outperforming it. IBIS shows promise as an efficient and pragmatically useful predictor of future purchase.
... These projects demonstrated improved adaptability and alignment by enabling direct communication among stakeholders and leveraging collaborative history. This approach represents a paradigm shift from traditional reliance on hierarchical coordination [26], [16], emphasizing instead a networked, participatory model of supplier integration that enhances responsiveness to project dynamics. ...
... Unrealistic timeline [26], [19] Overconfidence Bias ...
Innovation projects play a crucial role in maintaining competitive advantage but often experience high failure rates. This study examines how behavioral biases influence supplier resource management in failed innovation projects. Using Resource Orchestration Theory as a lens, we analyze six failed projects, each involving two suppliers, to explore how cognitive biases disrupt critical resource management activities, including structuring, bundling, and leveraging. Key biases, such as overconfidence, optimism, and strategic misrepresentation, were found to skew decision-making, prioritizing technical competencies over relational history during supplier selection. This misalignment impaired supplier interactions and knowledge-sharing practices, ultimately contributing to project failure. The findings offer a novel perspective on how cognitive biases undermine resource orchestration and highlight the importance of incorporating collaborative history into supplier selection frameworks. Addressing these biases can significantly improve decision-making processes and enhance the success of innovation projects.
... Without self-regulation of the ego, collaborator input is perceived as relinquishing control (Sarasvathy, 2001). Therefore, to evaluate the efficacy of experiential learning, educators should examine how students become self-aware and self-regulate against the harmful effects of stress and ego, concurrently avoiding errors in judgment, such as confirmation bias and the escalation of commitment when confronting disconfirming evidence (Kahneman & Tversky, 1977, 1979. Based on the mindset triad, we envisage a firstand second-person core of a tailored experiential pedagogy, where critical reflection on action is central to most forms of assessments. ...
... As shown, metacognition enables students to challenge their own assumptions, catch and attend to cognitive traps in decision-making such as 'confirmation bias' and 'sunk cost fallacy' (Kahneman & Tversky, 1977, 1979, which ultimately leads to sound decision-making under the error-inducing challenges of entrepreneurial journeys (Baron, 1998). For instance, in Case 1, the student states: 'when I dealt with the customers' frustrations, I realized that we should not only look at positive things that confirm our idea'. ...
Despite the recent recognition of experiential learning as an effective pedagogy for cultivating entrepreneurial mindsets, it still lacks a robust and tailored conceptual foundation primed for adoption in entrepreneurship education (EE). Addressing this deficit, this research integrates action learning and design learning to propose Action Design Learning (ADL) as a bespoke and adaptable framework for experiential learning in EE. ADL fosters entrepreneurial mindsets by placing first- and second-person learning at the core of pedagogy, using emergent entrepreneurial artifacts as focusing devices. Through longitudinal insider action research, the framework is abductively evaluated across two cases in Irish universities, culminating in a functional adaptation primed for adoption. The study reveals that ADL provides a robust conceptual foundation that educators can readily apply in designing and delivering high-impact curricula that foster metacognitive abilities deemed foundational to an entrepreneurial mindset. Consequently, this study contributes to the experiential learning discourse by offering a theoretically grounded pedagogy that overcomes skepticism about the efficacy of this approach in promoting high-impact EE.
... Sunk cost fallacy impairs a firm's reevaluation strategy wherein managers continue to invest in a foreign market beyond the point of viability to justify resources already expended even when the indicators suggest additional investments are unlikely to yield a favorable outcome. It causes managers to ignore diminishing returns for resources that could be optimally deployed elsewhere (Kahneman & Tversky, 1977). Instead of considering future benefits and the likely costs, decisions are based on accumulated investments. ...
... Confirmation bias leads decision makers to view ownership and control not in terms of the likely implications but as a means to support existing beliefs (Kahneman & Tversky, 1977). It is driven by selective information where the evidence sought and prioritized is conditioned by expected outcomes instead of a proper understanding of the pertinent knowledge, resources, and risks (Buckley, Devinney, & Louviere, 2007). ...
In this practitioner-focused study, we discuss how cognitive biases impair foreign market entry decisions. Focusing on three factors that are central to the evaluation of foreign markets: cost, control, and uncertainty, we explain how decision-making biases undermine their assessment and the ways in which the biases can be mitigated. Specifically, overconfidence bias and the sunk cost fallacy negatively affect the estimation of entry costs which can be mitigated by a strong governance structure and independent reviews; anchoring and confirmation biases undermine the assessment of an appropriate level of control requiring the use of systematic decision frameworks and decision extension tools; and representativeness and availability biases limit the comprehension of environmental uncertainty suggesting mitigation strategies such as the challenging of internal assumptions and devil’s advocacy. By explicating how managerial biases turn into flawed assessments of foreign markets, our study uncovers the mechanisms that explain and potentially remedy cognitive pitfalls during internationalization.
... Effect. An emotion bias that causes individuals to overvalue something they are close to, regardless of its objective value (Kahneman & Tversky, 1979;Thaler, 1980). For example, Basketball scouts who get to know a player more closely, follow their development over time, meet his parents, and have forged a bond with them may overvalue the player and become blind to their flaws (Johnston et al., 2022). ...
... There is a tendency to make insufficient allowance for regression toward the mean when predicting from an imperfectly reliable predictor (Kahneman & Tversky, 1979). For example, NBA front office personnel tend to make extreme decisions that are not justified by supporting evidence (Massey & Thaler, 2013). ...
Every year, professional basketball franchises convene for an entry draft to select the next generation of talent for their respective teams. This article describes an experiential exercise that places students in the role of team executives of a fictionalized professional basketball franchise. Students are tasked with evaluating a group of draft-eligible athletes and making the optimal selection for their team, considering a wide array of skills, abilities, and attributes. The Basketball Draft Night Exercise is informed by extensive research on sport entry drafts spanning several decades and sheds light on the systematic errors, fallacies, and decision-making biases that arise when making talent selections under uncertainty. Furthermore, this exercise illuminates the potential pitfalls and cognitive errors committed by experts when assessing and selecting talent under uncertainty.
... 35,36 Work-life balance is threatened by our tendency to overestimate benefits and underestimate costs of future tasks, including the time required to complete these tasks, a systematic bias that Kahneman and Tversky refer to as the planning fallacy. 37 Predictions of work-life balance may be particularly bias-prone when those making the predictions are unfamiliar with the situation in which they will perform the future task-and our typical response to this uncertainty is to inflate our perceived ability and diminish the risk that the future situation will be unfavourable (optimism bias). 38 Failure to appreciate the impact that changing from a training environment to independent practice may have on future clinical performance and assuming a continued learning trajectory are a hazard to future clinical performance, 34 as is attributing our clinical skills to inherent ability rather than the result of sustained deliberate practice, [39][40][41] and the belief that the knowledge and clinical skills that we have acquired will not decay over time. ...
... Similarly, a review of the types of cognitive biases that can affect initial decisions might attenuate the impact of attribute substitution and other cognitive biases on decision-making. 26,37,38 Interventions can also be planned regarding decisions related to work-life balance and personal learning strategies at transition points in training, including during the transitionto-discipline and transition-to-practice phases of residency training. 45 This type of intervention is the norm in undergraduate training but becomes less prevalent during later stages of training and beyond. ...
Background
For medical training to be deemed successful, in addition to gaining the skills required to make appropriate clinical decisions, trainees must learn how to make good personal decisions. These decisions may affect satisfaction with career choice, work–life balance, and their ability to maintain/improve clinical performance over time—outcomes that can impact future wellness. Here, the authors introduce a decision‐making framework with the goal of improving our understanding of personal decisions.
Methods
Stemming from the business world, the Cynefin framework describes five decision‐making domains: clear , complicated , complex , chaotic , and confusion , and a key inference of this framework is that decision‐making can be improved by first identifying the decision‐making domain. Personal decisions are largely complex—so applying linear decision‐making strategies is unlikely to help in this domain.
Results
The available data suggest that the outcomes of personal decisions are suboptimal, and the authors propose three mechanisms to explain these findings: (1) Complex decision is susceptible to attribute substitution where we subconsciously trade these decisions for easier decisions; (2) predictions are prone to cognitive biases, such as assuming our situation will remain constant (linear projection fallacy), believing that accomplishing a goal will deliver lasting happiness (arrival bias), or overestimating benefits and underestimating costs of future tasks (planning fallacy); and (3) complex decisions have an inherently higher failure rate than complicated decisions because they are the result of an ongoing, dynamic person‐by‐situation interaction and, as such, have more time to fail and more ways to do so.
Discussion
Based upon their view that personal decisions are complex, the authors propose strategies to improve satisfaction with personal decisions, including increasing awareness of biases that may impact personal decisions. Recognising that the outcome of personal decisions can change over time, they also suggest additional interventions to manage these decisions, such as different forms of mentoring.
... Specifically, consistent with a literature in political psychology on the persuasive impact of an "inside" view (Freling et al., 2020;Kahneman & Tversky, 1982), we theorize that prior experience with governance failure influences how citizens respond to subsequent efforts at correction. For individuals who can recall and recognize from experience the failure as substantively similar-and therefore suggestive of unsolved underlying problems-the impact is likely to be particularly consequential. ...
In a substantial literature on political trust in normal times, we know little about the impact on trust of crises or subsequent government efforts at correction. We investigate these impacts by analyzing a pair of similar governance failures in China, a strong single-party authoritarian state with high levels of political trust and sophisticated tools to manage negative information about its performance. We theorize that how citizens update beliefs about government trustworthiness depends on prior experience: firsthand knowledge and anecdotal evidence supply powerful “insider” information that citizens bring to their processing of news. We leverage occurrence of two exogenous shocks—a vaccine crisis and a subsequent government correction—with administration of a face-to-face, nationally representative survey in 2018. We find: (1) the 2018 crisis reduced trust, regardless of prior experience; and (2) the subsequent correction did not increase trust for “insiders,” residing in cities exposed to a similar crisis and correction in 2016, but did increase trust for other citizens. We show that governance failure is not a singular event concluded with crisis weathered and trust rebuilt through corrective efforts. Instead, it introduces a persistent constraint on the persuasiveness of government claims of trustworthiness. Past governance failures persist in social perceptions and are reactivated by similar failures, with attention to one failure elevated in the long term for citizens familiar with it from experience.
... To realize its global optimality, one thus needs to commit to a plan determined at the initial time of planning throughout the planning horizon, disallowing re-evaluations 3 no matter what happens in the future. Such commitment is against human nature; empirical evidence reveals that without relying on commitment devices [8], humans tend to reassess their plans at some future times and states, making them prone to future deviations for the lack of self-control [32,7]. Consistent planning is robust 4 under future re-evaluations and thus is the more rational choice in the event that commitment devices are unavailable or not useful. ...
Time inconsistency (TIC) often arises in multiperiod decision-making through the encoding of more realistic human preferences as objectives; TIC describes a situation in which a plan, consisting of current and future actions, that is optimal today may no longer be optimal in the future. The sub-game perfect equilibrium (SPE) solution is well-known to resolve such TIC, backed by evidence from behavioral economics and stochastic control literature. Motivated by TIC proliferation and SPE desirability in handling TIC, this paper establishes a subgame perfect equilibrium reinforcement learning (SPERL) framework to search for an SPE solution for TIC problems. We propose a new class of algorithms, called extended backward policy iteration (EBPI), that solves SPERL and concurrently addresses two algorithmic challenges in TIC-RL: the nonexistence of natural recursive relationships between value functions at different time points and the questionable applicability of standard policy iteration algorithms due to unprovable policy improvement theorems. To demonstrate the practical usage of EBPI as a training framework, we adopt standard RL sample-based methods and derive two EBPI-based training algorithms. We examine our derived training frameworks on a mean-variance portfolio selection problem and evaluate some performance metrics including convergence and model identifiability.
... Finally, Section 5 presents the conclusions, offering key insights and policy recommendations based on the findings. Kahneman and Tversky's (1979) prospect theory is foundational in understanding the behavioral aspects of investor decision-making, particularly by highlighting how investors exhibit asymmetric sensitivity to gains and losses. This theory emphasizes that individuals are more sensitive to losses than to equivalent gains, challenging the classical expected utility theory. ...
... Variations in extreme trust levels will result in variations in how information is interpreted and assessed, which will lead to variations in the solutions that are produced, [32]. The majority of psychology research concludes that overconfident behavior Decision makers are more likely to make erroneous forecasts than logical, well-informed ones when they are encouraged by their nature to make such judgments. ...
High overconfidence (a high degree of calculation error) among investors can lead to an overestimation of the price of securities, which can lead to unintentional purchases at a higher price or sales at a price below the underlying value, which can result in transaction losses. The purpose of this study is to examine the connection between overconfidence and the precision of stock price forecasts in the Sharia capital market of Indonesia. This study approach observes investors' reactions in an experimental laboratory setting after they are provided with important information. Based on self-confidence, the research design was split into three classification groups. Markets that get negative news and markets without information are the two categories of treatment. Based on the conducted experiments, the research findings demonstrated that in all experimental market sessions, investors with high overconfidence tended to overestimate the accuracy of their knowledge and information, resulting in higher average predictions and price errors than investors with low overconfidence. This data implies that investors with a high degree of confidence are susceptible to self-deception. The study's findings also demonstrate that, in contrast to investors with low overconfidence, those with strong overconfidence do not necessarily experience losses, even though their average prediction error or price is larger.
... This does not take into account negative wider impacts, like environmental and social costs, which are often substantial for large infrastructure projects, and which, if included, would reduce the aggregate effect of wider impacts.2 The planning fallacy was originally formulated byKahneman and Tversky (1979) andBuehler et al. (1994) to apply to estimates of completion times and schedules. The concept was later expanded byLovallo and Kahneman (2003),Flyvbjerg (2008), andFlyvbjerg and Sunstein (2017) to also include the costs and benefits of decisions. ...
This paper asks and answers the question of whether Kahneman's planning fallacy or Hirschman's Hiding Hand best explain performance in capital investment projects. I agree with my critics that the Hiding Hand exists, i.e., sometimes benefit overruns outweigh cost overruns in project planning and delivery. Specifically, I show this happens in one fifth of projects, based on the best and largest dataset that exists. But that was not the main question I set out to answer. My main question was whether the Hiding Hand is "typical," as claimed by Hirschman. I show this is not the case, with 80 percent of projects not displaying Hiding Hand behavior. Finally, I agree it would be important to better understand the circumstances where the Hiding Hand actually works. However, if you want to understand how projects "typically" work, as Hirschman said he did, then the theories of the planning fallacy, optimism bias, and strategic misrepresentation - according to which cost overruns and benefit shortfalls are the norm - will serve you significantly better than the principle of the Hiding Hand. The latter will lead you astray, because it is a special case instead of a typical one.
... Assumptions about e.g., user training, testing and operations equipment being covered and planned outside the scope of the project should be verified in the preparation phase, not discovered in the execution phase, causing inflation in the scope of work and cost. If no suitable reference class (Flyvbjerg, 2007;Kahneman and Tversky, 1977) for software project scope inflation is available, industrial averages can be used instead for validating the adequacy of contingency allocation. ...
Information technology (IT) projects often fail. Postmortem analysis is not general practice in IT project management. This is a missed opportunity for IT project management because postmortem analysis is a proven source of practice improvements and preventive actions in other domains. In this paper, the root causes of failure of a major IT project are identified by postmortem analysis, a well-established method for investigating accidents and failure ex post facto to improve practice and performance. The root causes of failure identified are: a) inadequate planning, b) novelty of a technology to the organisation, and c) inappropriate software development method and process. The postmortem offers insights into risks and challenges that IT projects still face today. Significantly, the postmortem analysis shows how a different approach to project planning could have prevented the failure and termination of the project. This paper also demonstrates how systematic IT project postmortem analysis can be conducted based on leading theory of process tracing and causal modelling in combination with the literature on IT project failure. The demonstration of this approach to IT project postmortems is new and original.
... The use of failure factors from the literature, which by definition are "managerially controllable" (Schmidt, 2023), and the choice of a compatible definition of root causes as causes that "management has control to fix" (Paradies & Busch, 1988) focus the analysis on areas that are realistic to address by practice changes. The focus on areas of activity that are under management control is a strength, but clearly also a limitation, because it excludes other kinds of explanations, for example psychological (Flyvbjerg, 2007;Kahneman & Tversky, 1977), political (Flyvbjerg, 2007), and explanations involving causal powers that emerge on social structures (Elder-Vass, 2011). ...
... Studying biases in "real-world" decision making (as opposed to lab settings) is a growing, yet underdeveloped, field (Toplak et al. 2017). In this paper, we return to one of the first real-world settings studied by Kahneman and Tversky (1977), namely project investment decisions. Kahneman and Tversky's early work was foundational for how to think about projects. ...
The paper explores "uniqueness bias," a behavioral bias defined as the tendency of planners and managers to see their decisions as singular. For the first time, uniqueness bias is correlated with forecasting accuracy and performance in real-world project investment decisions. We problematize the conventional framing of projects as unique and hypothesize that it leads to poor project performance. We test the thesis for a sample of 219 projects and find that perceived uniqueness is indeed highly statistically significantly associated with underperformance. Finally, we identify how decision makers can mitigate uniqueness bias in their projects through what Daniel Kahneman aptly called "decision hygiene," specifically reference class forecasting, premortems, similarity-based forecasting, and noise audits. 3
... The foundation of many current asset pricing models, such as CAPM and APT, relies on Utility theory principles. However, Kahneman and Tversky (1979) conducted experiments that presented evidence contradicting Utility theory. Their research highlighted phenomena such as the Certainty Effect, Reflection, Isolation effect, and others, which challenge the traditional utility theory. ...
The literature on overconfidence has witnessed prolific growth since the beginning of the century. This context underscores the necessity to comprehend and categorize an increasingly diverse body of overconfidence research within the financial domain. This study reviews existing literature on financial overconfidence from its inception to the present with a detailed review of 132 articles from 84 journals by examining theories, context, and methods (TCM) used in overconfidence research. Our review unpacks significant themes (i.e. determinants of overconfidence, overconfidence and risk-taking, overconfidence measures and type of investors, overconfidence in a volatile market, overconfidence, and personal financial behavior). We propose a pertinent research framework to investigate the less investigated aspects of financial overconfidence and suggest future research direction.
... The most common problem is overconfidence, which leads to an illusion of competence (Moore et al., 2015;Feld et al., 2017). It accompanies Experts do not quite correctly determine the confidence interval of their own estimates (Lichtenstein, Fischhoff, 1977), overestimate or underestimate what can be achieved over a certain period of time (Kahneman, Tversky, 1979;Sharot et al., 2012), create scenarios based on the development of the present in the future, and at the same time focus on optimistic scenarios (Newby -Clark et al., 2000). They persist in this misconception even in the face of negative feedback (Buehler et al., 1994). ...
Foresight projects are expected to provide realistic scenarios for different future scenarios, which provides a better information base for relevant strategies. However, these expectations often turn out to be at least difficult to fulfill due to the uncertainty of the external environment and cognitive biases. Therefore, the idea of assessing each stage of Foresight is gaining relevance, which is of particular importance in the energy sector, which affects a variety of areas of life. This article analyzes the results of the Egyptian energy foresight study, Egypt LEAPS, in terms of process efficiency and forecast accuracy as well as the factors that influenced it, including cognitive biases. The authors conclude that for each stage of foresight, a thorough analysis of weaknesses and shortcomings is necessary. Therefore, from the very beginning, the foresight process should include reliable mechanisms for assessing results and a readiness for constant iterations. Consistent process adjustments that rely on new ways of dealing with complexity and uncertainty in dealing with the future help build trust among participants and consistently reduce the level of erroneous assumptions.
... The evidence-based management theory and the planning fallacy provide theoretical explanations for cost planning causes in projects. Cost planning is often based on experience and intuition (Kahneman and Tversky, 1982). Also, limited access to relevant and high-quality cost data is challenging (Reay et al., 2009). ...
Large public procurement projects often face systematic cost deviations. Research aims to analyze these cost deviations to identify the underlying causes and develop appropriate solutions. Furthermore, existing research tends to examine theories in a cursory manner to enhance comprehension of cost deviations, leading to a fragmented understanding of the underlying reasons and remedies for systematic cost deviations. This study adopts a theorizing approach, incorporating organizational buying behavior, prospect theory, and evidence-based management theory, to offer a unified understanding of cost deviations, their underlying causes, and solutions. This study contributes to the elaboration of existing theoretical constructs and relationships, while emphasizing for cost planners and decision-makers the importance of cost information for reliable procurement decisions.
... It may mean that one should incorporate rules pertaining to manufactured vehicles of all kinds in an ES that will be used to evaluate aircraft designs. Tis is related to reference class forecasting [24] and the reference class problem. For one, rules concerning specifcs can easily multiply the number of rules and input variables (see Section 3.2). ...
The more “manufacturable” a product is, the “easier” it is to manufacture. For two different product designs targeting the same role, one may be more manufacturable than the other. Evaluating manufacturability requires experts in the processes of manufacturing, “manufacturing process engineers” (MPEs). Human experts are expensive to train and employ, while a well-designed expert system (ES) could be quicker, more reliable, and provide higher performance and superior accuracy. In this work, a group of MPEs (“Team A”) externalized a portion of their expertise into a rule-based expert system in cooperation with a group of ES knowledge engineers and developers. We produced a large ES with 113 total rules and 94 variables. The ES comprises a crisp ES which constructs a Fuzzy ES, thus producing a two-stage ES. Team A then used the ES and a derivation of it (the “MAKE A”) to conduct assessments of the manufacturability of several “notional” designs, providing a sanity check of the rule-base. A provisional assessment used a first draft of the rule-base, and MAKE A, and was of notional wing designs. The primary assessment, using an updated rule-base and MAKE A, was of notional rotor blade designs. We describe the process by which this ES was made and the assessments that were conducted and conclude with insights gained from constructing the ES. These insights can be summarized as follows: build a bridge between expert and user, move from general features to specific features, do not make the user do a lot of work, and only ask the user for objective observations. We add the product of our work to the growing library of tools and methodologies at the disposal of the U.S. Army Engineer Research and Development Center (ERDC). The primary findings of the present work are (1) an ES that satisfied the experts, according to their expressed performance expectations, and (2) the insights gained on how such a system might best be constructed.
... Two examples are optimism bias, where the possibility of random or uncontrollable events is ignored, and anchoring, the tendency to base estimates on information that is only apparently relevant. Together these biases contribute to the planning fallacy (Kahneman and Tversky, 1979;Buehler et al., 1994;Lovallo and Kahneman, 2003). Kahneman and Lovallo (1993) observe that these biases are likely to be greater for initiatives that a company has never attempted before, such as implementing new manufacturing technologies or entering new markets. ...
... draws on behavioral economic theories of decision-making under uncertainty developed byKahneman and Tversky[16],[17] and Lovallo and Kahneman[18], suggesting psychological (i.e., optimism bias) and political (i.e.,strategic misrepresentation) explanations are the root causes of cost overruns in transport infrastructure projects. The Planning Fallacy assumes that estimators will "underestimate costs, completions, and risks of planned actions" and, at the same time, "overestimate the benefits of the same actions" and may intentionally manipulate figures and lie to ensure projects are undertaken [15 p.7]. ...
Collaborative procurement methods such as alliancing and its variants are becoming increasingly popular in delivering large-scale transport infrastructure projects. The systematic design of the Project Alliance Agreement (PAA) provides the basis for stimulating collaborative behaviors to be enacted, which contributes to ensuring best-for-project decision-making and outcomes are delivered. However, despite the nascent adoption of alliancing, knowledge is absent on effectively delivering transport infrastructure projects on time and within budget. Thus, this article focuses on alliances and addresses the following question: How can alliances produce reliable target outturn costs (TOC) for transport infrastructure projects? To answer this question, we draw on the experiences of senior executives involved in formulating a TOC (including the target adjustment event) in rail infrastructure projects. We find the PAA shapes and guides collaborative behaviors, enabling alliance team members to jointly consider the context and complexity of projects and thus develop realistic and reliable estimates of their TOC. The insights we obtained from the senior executives provide insights into the decision-making processes of alliances, enabling a better understanding of how large-scale rail infrastructure projects' cost and time performance can be improved.
... The focus on managerially controllable factors (Rockart, 1979;Bullen and Rockart, 1981;Pinto and Slevin, 1987;Pinto and Mantel, 1990;Paradies and Busch, 1988;Atkins, 2001), and the corresponding selection of literature that identifies multiple such factors excludes important literature, including papers by Flyvbjerg Flyvbjerg and Richardson, 2002;Flyvbjerg, 2007Flyvbjerg, , 2009bFlyvbjerg, , 2014Budzier, 2011b, 2011a), Love, Ika, Pinto, Jugdev, and Zwikael (Love et al., 2022;Ika et al., 2022;Ika and Pinto, 2022a;Pinto et al., 2022). Flyvbjerg identifies multiple reasons for inadequate project planning and preparation: a) technical explanations, including imperfect forecasting techniques, inadequate data, honest mistakes, and lack of experience (Flyvbjerg, 2007, p49), b) psychological explanations: The planning fallacy and optimism bias (Flyvbjerg, 2007;Kahneman and Tversky, 1977), and c) political-economic explanations, including overestimating benefits and underestimating costs in order to have projects accepted, driven both by project owners and contractors (Flyvbjerg, 2007). The analysis in this paper supports Flyvbjerg's focus on the front-end of projects since most failure factors identified represent causes of failure that originate at the front-end of IT projects. ...
This paper shows how causes and mechanisms behind past information technology (IT) project failures can be used for systematic risk mitigation in new IT projects. This is significant because successful IT projects are needed to realise the benefit potential of digitalisation, whereas failed IT projects overspend resources and underdeliver benefits. In this paper we a) identify factors and causes that lead to IT project failure, b) analyse the consistency over time of the identified factors and causes, c) expose mechanisms of failure by analysing failure factors, causes, and common features of IT projects, and d) show how this knowledge can be used in IT project risk evaluations. The paper uses hermeneutic literature review, statistical analysis of failure factors in the literature, content analysis of the reviewed literature, and process tracing.
Psychological well‐being is remarkably stable over time. However, people may still believe that the future will deviate from the past. Across four experiments in Norway and the United States ( N = 1,827), participants were randomly assigned to report their well‐being in the past or predict their future well‐being. In line with a “bright‐future hypothesis”, people predicted higher levels of happiness and meaning in the future than in their historical baseline. We observed the same optimistic pattern for a 1‐year as a 5‐year time horizon. Rather than reflecting a past‐neglecting cognitive mechanism, the evidence mostly favored a motivational explanation. First, the effect emerged both between‐subjects and within‐subjects: Even when people had just reported their past well‐being, they still predicted future improvement. Second, predicted well‐being improvement generalized to social judgments of a friend but not to an enemy, mediated by judgments of deservingness. In conclusion, people predict a bright future when they want to see one.
Social psychology expresses the relationship between individuals and society in the real world as a theory and tests it using laboratory experiments as one of its methods. A similar aspect between gaming and the real world is that people experience an abstract model of the real world. This study illustrates the notion using real-life examples of gaming to examine the theory of social psychology. It is discussed as ways in which game implementers can use and apply: (1) the design of systems for an individual’s evaluations of others, (2) differences in perception between players and observers of the process of group formation and conflict, (3) the transferability of rules and themes about individual cooperative behavior in groups, and (4) the relationship between gaming and reality regarding persuasive communication, and the role functions of psychological safety for players. Finally, the study examines social psychology through gaming and cites chemical reactions as metaphors.
A novel schedule forecasting methodology (Nostradamus Objective) was developed to predict schedule risk of a unique, large-scale acquisition program that is characterized as low volume, highly complex, new product development (NPD) effort at its early stages. The goal was to produce objective evidence-based product-delivery schedule forecasts with high precision. Nostradamus was designed to model a manufacturer's accuracy in projecting it's product components completion dates of a recently-delivered unit (i.e., "past information"), and combining it with "current information" to make accurate/objective delivery date forecasts for subsequent units currently being manufactured. The approach, while does not use a Bayesian formulation, has a Bayesian-like strategy. The past information used conforms with the "reference class concept" described by Nobel Prize winning work of Daniel Kahneman and coworkers and possesses the highest similarity to products being manufactured. Additionally, the algorithm ranks a list of components that significantly affect product delivery dates. Hence, targeted measures can be taken to favorably affect the product delivery dates and reduce the overall project schedule risk. The product's major components, and associated estimated completion dates (ECDs), which are defined, determined, and provided by the manufacturer, constitute the current information. The current information and manufacturer's estimated product delivery date, collectively define the Line-of-Balance (LOB), which is provided at each Program Management Review. The "Accuracy Level" probability distribution function of the ECDs is defined and calculated for a most recently delivered product and utilized in a subsequent Monte Carlo simulation with the current information, to generate a product delivery failure probability (DFP). This DFP was used to generate the Nostradamus Objective's forecast of product delivery date at any probability level. Results of the tests indicated that, over a 2.5 year project duration, Nostradamus Objective achieved a time-averaged forecast imprecision value of-3%, as compared to 143% by the manufacturer, thereby providing reliable, precise, and consistent schedule assessments from which program risks can be identified and mitigated.
bold xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">Background:
Students in technical communication classes need to develop expert-like competence in project schedule management to prepare for academic and career success. We address two aspects of project schedule management—estimating time and estimating the number of drafts—that affect undergraduate computer science students in linked computer science–technical communication courses as they prepare documents for their client-based team project.
Literature review:
Our research considers three areas (developing expert-like behaviors, estimating time, and estimating the number of drafts) that students need to address in their coursework with complex, client-based problems.
Research question:
What percentage of students accurately estimate, overestimate, or underestimate the time needed to complete project tasks in face-to-face and hybrid sections? We define accurately estimating time as an expert-like behavior and categorize both generating documents and estimating the number of drafts as project tasks.
Research methodology:
To discuss this research question, we introduce the participants, explain our informed consent, describe our survey instrument for collecting data, and detail our research design.
Results/discussion:
We present student estimations in two categories: estimated versus actual time to complete assignments and the number of estimated versus actual drafts completed. We learn that students misjudge the amount of time and the number of drafts needed to complete a project, suggesting that technical communication coursework can better prepare students in developing these competencies.
Salesforce, a leading customer relationship management (CRM) platform, employs cutting-edge technology to enhance its services and address complex business challenges. This paper explores how Salesforce leverages advanced tools to improve various CRM aspects, such as customer service, sales forecasting, marketing automation, and personalized customer experiences. By integrating tools like Salesforce Einstein, businesses can gain deeper insights into customer behavior, streamline operations, and drive strategic decision-making. The study includes real-world case studies that demonstrate the practical applications and benefits of these technologies within the Salesforce ecosystem, providing insights into future trends and developments in enhanced CRM solutions.
Individuals often have difficulties completing tasks in a timely manner. Whether it be scheduling a doctor's appointment, purchasing a birthday gift, or booking an airline ticket, waiting until the very last minute can carry serious consequences. In two experimental studies, we explore how individuals can be encouraged to finish tasks promptly. We provide evidence for the “fresh start effect” by showing that a temporal landmark signaling a new beginning helps speed up their task completion. Notably, we demonstrate that the “fresh start nudge” can facilitate early task completion through the underlying processes of meaningfulness and motivation. We also report the moderating role of task openness, supporting the claim that the fresh start effect is stronger when the task is perceived to be relatively closed (rather than open) and must therefore be completed in fewer steps without interruption.
Wie sieht ethische Verantwortung im Zeitalter der Digitalisierung, Datafizierung und Künstlichen Intelligenz aus? Die Beiträger*innen geben fundierte Einsichten in die KI-gestützte Entscheidungs- und Urteilsfindung. Von der digitalen Operationalisierung über die Rolle des Menschen im Zentrum des technischen Fortschritts bis hin zur Konzeption von vertrauenswürdigen Systemen – im Fokus steht die Diskussion von Chancen und Herausforderungen, die nicht nur Akademiker*innen vielseitige Anregungen zur weiteren Auseinandersetzung mit dem Thema gibt.
This This study aims to determine the influence of behavioral finance or psychological bias on investment decisions made by Employee Stock Ownership holders of PT Bank Central Asia. Tbk focuses on variables such as overconfidence, herding, and anchoring. This research is based on qualitative data and uses multiple linear regression for its analysis and research tools using SPSS. This research questionnaire was spread across 155 holders of Employee Stock Ownership of PT Bank Central Asia.Tbk. The results showed that overconfidence and anchoring have a significant effect on influencing investment decisions. Overconfidence has the most significant influence on decision-making while herding has a more moderate influence. This research is expected to help understand what factors can influence investment decisions and can help to make better decisions and avoid potential biases that can lead to suboptimal results.
Humans play important roles in the process of quantifying uncertainty. The participation of humans in this important exercise opens the process to behavioral biases. In this paper, we examine the different types of biases that may occur when quantifying uncertainty using a process-oriented framework. In particular, we examine the potential biases in each of the major phases of the uncertainty quantification process. Traditionally, most of the literature has focused on biases that occur in the elicitation phase, but we discuss how these can also permeate in the pre- and post-elicitation phases. The recognition of biases in these different phases allows practitioners to potentially avoid, minimize, and correct behavioral biases that result in the multiple stages of the uncertainty quantification process.
Wie sieht ethische Verantwortung im Zeitalter der Digitalisierung, Datafizierung und Künstlichen Intelligenz aus? Die Beiträger*innen geben fundierte Einsichten in die KI-gestützte Entscheidungs- und Urteilsfindung. Von der digitalen Operationalisierung über die Rolle des Menschen im Zentrum des technischen Fortschritts bis hin zur Konzeption von vertrauenswürdigen Systemen - im Fokus steht die Diskussion von Chancen und Herausforderungen, die nicht nur Akademiker*innen vielseitige Anregungen zur weiteren Auseinandersetzung mit dem Thema gibt.
In recent years, the US has seen a significant rise in the rate of planned home births, with a 60 % increase from 2016 to 2023, reaching a total of 46,918. This trend positions the US as the leading developed country in terms of home birth prevalence. The American College of Obstetricians and Gynecologists (ACOG) suggests stringent criteria for selecting candidates for home births, but these guidelines have not been adopted by home birth midwives leading to poor outcomes including increased rates of neonatal morbidity and mortality. This paper explores the motivations behind choosing home births in the US despite the known risks. Studies highlight factors such as the desire for a more natural birth experience, previous negative hospital experiences, and the influence of the COVID-19 pandemic on perceptions of hospital safety. We provide new insights into why women choose home births by incorporating insights from Nobel laureate Daniel Kahneman’s theories on decision-making, suggesting that cognitive biases may significantly influence these decisions. Kahneman’s work provides a framework for understanding how biases and heuristics can lead to the underestimation of risks and overemphasis on personal birth experiences. We also provide recommendations (“nudges according to Richard Thaler”) to help ensure women have access to clear, balanced information about home births. The development of this publication was assisted by OpenAI’s ChatGPT-4, which facilitated the synthesis of literature, interpretation of data, and manuscript drafting. This collaboration underscores the potential of integrating advanced computational tools in academic research, enhancing the efficiency and depth of our analyses.
The Leading Entrepreneur Accelerator Platform (LEAP) Market is an alternative financing to the Main and ACE markets for small and medium enterprises (SMEs) to obtain capital. Over the past six years, the LEAP Market has attracted 48 SMEs, with a total fundraising of approximately RM231.2 million from their listing exercise and a combined market capitalization estimated at RM5.5 billion as of 29 March 2023 (Bursa Malaysia in https://www.bursamalaysia.com/trade/market/securities_market/leap_market, 2023.
La vida actual se vive con demasiada prisa; el tiempo dispuesto
diariamente a actividades relacionadas con tareas académicas,
personales y laborales parece insuficiente si se desea
lograr resultados de manera eficiente. Aunado, las redes sociales
y los contenidos de Internet han venido a ocupar una
gran parte de estos espacios usualmente empleados para realizarlas,
lo cual ocasiona su postergación, el incumplimiento
de los tiempos previstos, así como una afectación en los resultados
esperados.
Numerosos y diversos estudios internacionales se han
centrado en investigar las razones por las cuales los seres humanos
constantemente postergan la realización y el cumplimiento
de sus actividades y tareas al punto de que, de manera
inevitable, el tiempo los obliga a afrontarlas o abandonarlas.
Fenómeno de dilación llamado procrastinación, cuyo concepto
no es nuevo, pero las investigaciones al respecto sí son
relativamente recientes y se han enfocado en áreas diferentes
como la empresa, la vida cotidiana y el contexto académico.
Nascent entrepreneurs often believe that their chances of success are better than those of others due to imperfect information about the competencies and accomplishments of other entrepreneurs, leading to overplacement. Theory suggests that the provision of historical outcome data of comparable projects could help entrepreneurs develop more realistic plans and expectations by closing the information gap and enabling the calibration of their beliefs. However, effectively calibrating beliefs by incorporating new reference information requires effortful cognitive processing and rational integration of the data, which may be impeded by the same cognitive biases leading to overplacement initially. Drawing from a unique dataset that allows us to observe substantial parts of the planning process of 971 entrepreneurs, we investigate the effectiveness of providing reference values as a debiasing tool. Rather than rationally leveraging the information for honest self-assessment, our findings suggest that entrepreneurs use the information to differentiate themselves even more from the reference group after they see the historical values. This, in turn, results in an even higher level of overplacement.
JEL Classifications
G41, D91, L26, L25.
People have erroneous intuitions about the laws of chance. In particular, they regard a sample randomly drawn from a population as highly representative, that is, similar to the population in all essential characteristics.
Subjects were requested to choose between gambles, where the outcome of one gamble depended on a single elementary event, and the other depended on an event compounded of a series of such elementary events. The data supported the hypothesis that the subjective probability of a compound event is systematically biased in the direction of the probability of its components resulting in overestimation of conjunctive events and underestimation of disjunctive events. Studies pertaining to this topic are discussed.
From the subjectivist point of view (de Finetti, 1937) a probability is a degree of belief in a proposition whose truth has not been ascertained. A probability expresses a purely internal state; there is no “right” or “correct” probability that resides somewhere “in reality” against which it can be compared. However, in many circumstances, it may become possible to verify the truth o£ falsity of the proposition to which a probability was attached. Today, we assess the probability of the proposition“it will rain tomorrow”. Tomorrow, we go outside and look at the rain gauge to see whether or not it has rained. When verification is possible, we can use it to gauge the adequacy of our probability assessments.
This paper explores a heuristic-representativeness-according to which the subjective probability of an event, or a sample, is determined by the degree to which it: (i) is similar in essential characteristics to its parent population; and (ii) reflects the salient features of the process by which it is generated. This heuristic is explicated in a series of empirical examples demonstrating predictable and systematic errors in the evaluation of un- certain events. In particular, since sample size does not represent any property of the population, it is expected to have little or no effect on judgment of likelihood. This prediction is confirmed in studies showing that subjective sampling distributions and posterior probability judgments are determined by the most salient characteristic of the sample (e.g., proportion, mean) without regard to the size of the sample. The present heuristic approach is contrasted with the normative (Bayesian) approach to the analysis of the judgment of uncertainty.
This paper describes the preliminary results of three experiments in
subjective probability forecasting which were recently conducted in four
Weather Service Forecast Offices (WSFOs) of the National Weather
Service. The first experiment, which was conducted at the St. Louis
WSFO, was designed to investigate both the ability of forecasters to
differentiate among points in a forecast area with regard to the
likelihood of occurrence of measurable precipitation and their relative
ability to make point and area (including areal coverage) precipitation
probability forecasts. The second experiment, which was conducted at the
Denver WSFO, was designed to investigate the ability of forecasters to
use credible intervals to express the uncertainty inherent in their
temperature forecasts and to compare two approaches (variable-width
intervals and fixed-width intervals) to credible interval temperature
forecasting. The third experiment, which was conducted at both the Great
Falls and Seattle WSFOs, was designed to investigate the effects of
guidance (i.e., PEATMOS) forecasts upon the forecasters' precipitation
probability forecasts.For each experiment, some background material is
presented; the design of the experiment is discussed; some preliminary
results of the experiment are presented; and some implications of the
experiment and the results for probability forecasting in meteorology
and probability forecasting in general are discussed. The results of
each of these experiments will be described individually and in much
greater detail in a series of forthcoming papers.
There exist many laboratory experiments with assessment of subjective probabilities. This paper presents an attempt to tie an experiment to a “practical” situation involving the development of buying prices on the Stock Exchange. The experiment also studies assessments of nondichotomous distributions in contrast to most other probability assessment experiments. The results confirm that people can quantify their beliefs reasonably well in probabilistic terms. However, subjects often failed to make better forecasts than would mechanical schemes based on past frequencies. The results improved considerably when the distributions assessed by a set of subjects were aggregated into a consensus.
In the predecisional stage of information processing subjects often revise prior probabilities of several hypotheses on the basis of sample information. Multiple probability learning, defined as learning to associate events with their probabilities of occurrence, is often crucial for a consistent utilization of both prior and sampling distributions in probabilistic inference tasks. Two-choice probability learning studies have not provided much information about the manner in which subjects learn probabilities of events mainly because results of both perceptual learning and decision processes are confounded in the subject's prediction response. Extensions of the classical 2-choice paradigm to more than 2 alternatives and even to values of a continuous variable often suffer from the same weakness although sometimes response proportions and subjective probability estimates were collected simultaneously, indicating that they are fundamentally different dependent variables. The problem of measuring subjective probabilities is briefly discussed and some suggestions are made concerning research still to be done.
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