An Empirical Examination Of The Willingness Of Managers To Use Utility Theory

This paper presents the results of an empirical examination of the willingness of business managers to make use of utility prescriptions as an aid to their decision‐making. Twenty‐nine managers took part in the experiment which involved the creation of a utility function for each one and the subsequent use of the function to prescribe behaviour in a series of decision problems. Testing the effectiveness of the functions could not be done simply by comparing actual and prescribed behaviour alone as the functions were being looked upon as normative and not necessarily predictive of what each subject would do. The managers were therefore assigned to one of three groups. Group one were given details of their utility prescriptions prior to tackling the decision problems. Group two were provided with their prescriptions after they had answered the decisions and were then given the opportunity to make any alterations and group three were given no information about their prescriptions. A significant variation was detected between the three groups with those having knowledge of their prescriptions displaying the smallest differences between actual and prescribed behaviour. While the timing of this knowledge did not seem to be important the managers, all mature executives, made considerable use of the information they were given. A wide monetary range was covered by the decision problems but for subjects, with knowledge of their prescriptions, the difference between actual and prescribed behaviour was extremely small.