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| Author: | Chi, T. Fan, D. |
| Title: | Cognitive limitations and investment "myopia" |
| Journal: | Decision Sciences
1997 : WINTER, VOL. 28:1, p. 27-57 |
| Index terms: | BIAS COGNITION DECISION MAKING INVESTMENTS PROJECT MANAGEMENT STOCHASTIC PROCESSES |
| Language: | eng |
| Abstract: | In an uncertain and dynamically evolving environment, optimixation of investment decisions is difficult due to the limitations of the decision maker's cognitive capacity. This article explores how a potential investment rule bias can affect the expected payoff from a project that has an uncertain development time and an uncertain completion cost. The results show that in the adopted decision rule the presence of a potential bias dissipates project value. For a longer term project the dissipating effect is greater if the completion cost is an increasing function of the completion time. |
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