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

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 allocation 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. Our 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: that 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 elicit for 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. Finally, by revealing individuals' implicit design-making paradigms, TradeSmith helps them experience key issues for managerial decision making. [ABSTRACT FROM AUTHOR]