The Decision Sciences Journal of Innovative Education

TRADESMITH: An Exercise to Demonstrate the Illusion of Control in Decision Making

Ben Martz, University of Colorado at Colorado Springs

Thomas C. Neil, Clark Atlanta University

Alessandro Biscaccanti, Groupe, ESC Dijon

ABSTRACT

Resource allocation decisions are a fundamental class of problems common throughout a business and therefore are found throughout business school curricula.  Entrepreneurs must allocate capital, financiers must allocate cash, and production managers must create the best mix of multiple-use resources.  Within this context, a business school’s curriculum, instructional materials and learning processes must consider the implications of individual decision making.  Traditional instructional content and delivery methods may effectively teach how to set up a decision problem and how to obtain an optimal answer.  Yet, we may not be teaching a key underlying factor: entrepreneurs, managers and future leaders appear to have implicit cognitive biases, which discount information and skew individual decision making.  The results of this study demonstrate that a phenomenon known as the “illusion of control” presents a fundamental challenge to the efficacy of formalized educational programs on decision making.  TradeSmith was designed as a problem-based learning exercise to illicit the illusion of control in a basic resource allocation decision environment.  The subjects in this study demonstrate a decision making pattern consistent with the illusion of control phenomenon.  By revealing individuals’ implicit design making paradigms, TradeSmith helps them experience key issues for managerial decision making.