Locally Rational Decision Making: The Distracting Effect of Information on Managerial Performance

Abstract

This paper describes a phenomenon called "locally rational" decision-making, in which the mere presence of information may have dysfunctional consequences even if decision makers do not process the information incorrectly. Using the results from an experiment conducted with a strategic market simulation game, we find that the accessibility of information results in a disposition to focus on those components of decision-making most clearly addressed by the information. If these are not the components most closely tied to success, overall performance may in fact suffer. The decision-making process is thus "locally rational" since it may be optimal with respect to specific components of a larger plan, but globally suboptimal with regard to ultimate outcomes and for the organization as a whole. We describe the implications of the phenomenon for the use of market-related data in managerial decision-making.decision making, rationality, strategy, information, performance, marketing simulation

Organizational Market Information Processes: Cultural Antecedents and New Product Outcomes

“…These findings support the view that the competitive advantage associated with information depends less on whether a firm has information and increasingly on whether a firm is able to make the best use of that information (Glazer 1991;Porter and Millar 1985). However, further research should formally investigate whether the utilization processes are mediating the impact of information acquisition and transmission processes.…”

“…Furthermore, it was suggested that how culture influences organizational information processes may be note that many researchers consider culture and climate to be synonymous. The finding that new product performance is promoted by instrumental utilization processes supports the linkages that previous research has made between firms' intensifying their adoption of information processes and the effectiveness of firm outputs (Glazer 1991). Moreover, the fact that conceptual utilization processes are also predictive of new product performance contributes to the extant research that rarely measures these processes and has had limited success in detecting their effects (Rich 1981;Weiss and Bucuvalus 1980).…”

Re-examining the deployment of market orientation in the public leisure sector

“…Moreover, when overloaded with information and faced with ever increasing quantities of intelligence, the decision-maker cannot direct sufficient attention to interpret and sift the information to identify priorities and best responses. The effect is compromise in the design and execution of responses to market change (Glazer et al, 1992;Souchon et al, 2004). …”

“…In essence, the responses of decision-makers are unlikely to be optimal because these decision-makers are forced to filter the abundance of information that confronts them (Ocasio, 1997). It is this filtration process that can distort responsiveness in the manner put forward by Glazer, Steckel, and Winer (1992), Souchon et al (2004), and Vyas and Souchon (2003) among others.…”

Stopping rule use during information search in design problems

“…Past research has demonstrated that experienced decision makers exhibit better judgments than novices, but they do so without using more information (see, e.g., Connolly and Gilani, 1982;Shanteau, 1992). Some research has shown that experienced decision makers are in fact distracted by too much information, and that too much information can interfere with decision making (Gaeth and Shanteau, 1984;Glazer et al, 1992). In information systems development in particular, some studies focusing on differences between experienced and novice analysts have shown that experience is an indicator of improved performance (Davis, 1982;Schenk et al, 1998;Walz et al, 1993).…”