Effect of Cognitive Biases and their Impact on Business Decisions

Abstract: Much has been discussed about cognitive biases and its influence on commercial decision-making. But there is scarcity of literature, establishing the correlation between two, so as to guide the practitioners in designing the needed programs and policies for the organisation. This study is a major contribution on grey relational analysis, which attempts to prioritize the factors of cognitive biases with respect to business decision making by using GREY analysis, to comprehend their relationship and investigate how those biases affect the business decision making. Means of the factors of cognitive biases were obtained and ranks are provided to those items using GREY analysis. The findings of the study are useful to the managers, who need to observe the rankings provided to the various items of cognitive biases and derive policies or make amendments as and where needed, according to the priority of the items. This would enhance the overall performance of the firm as suggested in the study. This study recognizes that cognitive biases strongly impact the decision- making process of the manufacturing firms. Hence, manufacturing firms need to concentrate on improving their debiasing techniques, which can significantly improve their organizational effectiveness. The uniqueness of this study is, prioritizing the selected cognitive biases with respect to business decision making by using GREY analysis. Hence, firms can concentrate and show maximum importance to eliminate or to reduce the impact of those biases in order to maximize the efficiency of the organizations. Keywords: Biases (Emotional, Interest, Memory, Situation, Stability), Decision Making, Prioritizing, GREY approach. JEL Classification Number: D7, D78