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When Making Bad Decisions Becomes Habit: Modelling The Duration Of Making Systematically Bad Decisions

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  • Victor DRAGOTĂ

    (The Bucharest University of Economic Studies)

Abstract

Most part of the models in economics and finance assume that, in general, deciders make good decisions, and bad decisions occur only as exception. This paper analyses some conditions in which bad decisions are made systematically and proposes a model for the estimation of the duration of making systematically bad decisions. Even if individuals are making systematically bad decisions, they can remain in power in many organizations for a long period. Based on Monte Carlo simulations, this paper proves that, in some circumstances, the duration of making systematic bad decisions can be very long.

Suggested Citation

  • Victor DRAGOTĂ, 2016. "When Making Bad Decisions Becomes Habit: Modelling The Duration Of Making Systematically Bad Decisions," ECONOMIC COMPUTATION AND ECONOMIC CYBERNETICS STUDIES AND RESEARCH, Faculty of Economic Cybernetics, Statistics and Informatics, vol. 50(1), pages 123-140.
    • Handle: RePEc:cys:ecocyb:v:50:y:2016:i:1:p:123-140
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    References listed on IDEAS

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    More about this item

    Keywords

    decision-making; homogeneous behaviour; rationality; corporate finance; decisional abilities; behavioural finance.;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm

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