Failing to Reason Knowns Already and Unknowns Evidently

Abstract

In today's world driven by technological developments and digital transformation, the implementation of customized decision-making systems with properly designed strategical objectives has become inevitable. A good decision which yields high outcome benefits makes effective use of the information available to the decision-maker. The important questions at this point are how the information can be used correctly and effectively with the limitations of information processing time and ability and subsequently how new information is integrated with the current beliefs in our decision process. The answers can be, as a normative model, the Bayesian reasoning approach. However, this may not always help us reach the right decision due to cognitive biases. Business leaders can also be adversely affected by uncertain future environments and abundant information. This chapter describes how Bayesian reasoning can mitigate biases in strategic decision-making and also how Bayesian reasoning errors can be eliminated by debiasing methodology in both strategic and medical decision making.