Testing the Effects of Experience on Risky Decision Making

Abstract

Scholars have proposed that people are cognitively biased in making decisions under uncertainty. However, most participants in such studies have been university students and faculty with minimal real world business experience. The purpose of this study is to test whether the findings of prospect theory are generalizable to participants with business experience. Results based on 89 Executive MBAs and 143 fulltime MBAs showed that cognitive biases are strongly embedded in the minds of participants. In fact, in certain contexts, the more experienced people showed stronger cognitive biases than those with less experience. Theoretical contribution and practical implications are discussed