Abstract
PurposeThis paper aims to develop a conceptual framework on how the representativeness heuristic operates in the decision-making process. Specifically, the authors unbundle representativeness into its building blocks: search rule, stopping rule and decision rule. Furthermore, the focus is placed on how individual-level cognitive and behavioral factors, namely experience, intuition and overconfidence, affect the functioning of this heuristic.Design/methodology/approachFrom a theoretical standpoint, the authors build on dual-process theories and on the adaptive toolbox view from the “fast and frugal heuristics” perspective to develop an integrative conceptual framework that uncovers the mechanisms underlying the representativeness heuristic.FindingsThe authors’ conceptualization suggests that the search rule used in representativeness is based on analogical mapping from previous experience, the stopping rule is the representational stability of the analogs and the decision rule is the choice of the alternative upon which there is a convergence of representations and that exceeds the decision maker's aspiration level. In this framework, intuition may help the decision maker to cross-map potentially competing analogies, while overconfidence affects the search time and costs and alters both the stopping and the decision rule.Originality/valueThe authors develop a conceptual framework on representativeness, as one of the most common, though still poorly investigated, heuristics. The model offers a nuanced perspective that explores the cognitive and behavioral mechanisms that shape the use of representativeness in decision-making. The authors also discuss the theoretical implications of their model and outline future research avenues that may further contribute to enriching their understanding of decision-making processes.
Highlights
The dynamics that guide individual decision-making have for long represented a vibrant research focus in multiple fields
In the remainder of the paper, we explore the individual cognitive and behavioral mechanisms that are enacted during representativeness, and, in particular, we focus on how experience, intuition and overconfidence affect this heuristic in the decision-making process
We suggest that experience may shape the effectiveness of the representativeness heuristic as it is associated with several potential benefits and risks
Summary
The dynamics that guide individual decision-making have for long represented a vibrant research focus in multiple fields. This line of inquiry lies at the core of dual-process theories, which suggest that cognitive processes may be categorized into two main families: Type 1 processes – being fast and intuitive- and Type 2 processes – being slower, reflective and analytical (Sloman, 1996; Kahneman and Frederick, 2002). Rather, they enable to navigate uncertainty and to solve complex decision situations at both individual and organizational levels (Davis et al, 2009; Mousavi and Gigerenzer, 2014; Artinger et al, 2015): since decision-making in business environments is inherently characterized by uncertainty (Guercini and Milanesi, 2020), using simple rules to make strategic decisions is justified but can be even more effective than more cognitively demanding approaches (Bingham and Eisenhardt, 2011). Taking an opportunity-capturing perspective, firms learn portfolios of heuristics (Bingham and Haleblian, 2012) that nurture the ability to flexibly seize opportunities in turbulent environments (Eisenhardt and Sull, 2001) and that consist of boundary rules (which opportunities to pursue), how-to rules (details on how to execute opportunities), priority rules (rank of acceptable opportunities), timing rules (the rhythm for executing opportunities) and exit rules (when to drop opportunities) (Eisenhardt and Sull, 2001; Bingham and Eisenhardt, 2011)
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