Cognitive biases resulting from the representativeness heuristic in operations management: an experimental investigation.

PURPOSE: Operations managers are subjected to various cognitive biases, which may lead them to make less optimal decisions as suggested by the normative models. In their seminal work, Tversky and Kahneman introduced three heuristics based on which people make decisions: representativeness, availability, and anchoring. This paper aims to investigate the six cognitive biases resulting from the use of the representativeness heuristic, namely, insensitivity to prior probability of outcomes, insensitivity to sample size, misconception of chance, insensitivity to predictability, the illusion of validity, and misconception of regression. Specifically, the paper examines how cognitive reflection and training affect these six cognitive biases in the operations management context. METHODS: For each cognitive bias, a scenario related to operations management was developed. The participants of the experimental study are asked to select among three responses, where one response is correct and the other two are biased. A total of 315 students from the University of North Texas participated in this study and 302 valid responses were used in the analysis. RESULTS: The results show that in all six scenarios, >50% of the respondents make biased decisions. However, using simple training, the bias is significantly reduced. Regarding the relationship between cognitive biases and cognitive reflection, the results partially support the hypothesis that people with high cognitive reflection ability tend to make less biased decisions. Regarding the effect of training on making biased decisions, the results show that making people aware of the existence of cognitive biases helps them partially to avoid making biased decisions. CONCLUSION: Overall, our study demonstrates the value of training in helping operations managers make less biased decisions. Our discussion section offers some related guidelines for creating a professional environment where the effect of the representativeness heuristic is minimized.

Latent semantic analysis.

This article reviews latent semantic analysis (LSA), a theory of meaning as well as a method for extracting that meaning from passages of text, based on statistical computations over a collection of documents. LSA as a theory of meaning defines a latent semantic space where documents and individual words are represented as vectors. LSA as a computational technique uses linear algebra to extract dimensions that represent that space. This representation enables the computation of similarity among terms and documents, categorization of terms and documents, and summarization of large collections of documents using automated procedures that mimic the way humans perform similar cognitive tasks. We present some technical details, various illustrative examples, and discuss a number of applications from linguistics, psychology, cognitive science, education, information science, and analysis of textual data in general. WIREs Cogn Sci 2013, 4:683-692. doi: 10.1002/wcs.1254 CONFLICT OF INTEREST: The author has declared no conflicts of interest for this article. For further resources related to this article, please visit the WIREs website.