Till now operations management mainly dealt with finding appropriate models to facilitate decision making processes, but these theoretical concepts did not always help to deal with actual processes in practice. Thus the understanding of human behaviour becomes more and more important. Furthermore the behavioural aspect of the decision making process plays a big role, as everyone of us would face resource allocation situations or portfolio decisions and people always do not make optimal decisions as mathematical models would do, but rather a completely another way often based on heuristics. Therefore it is interesting to investigate how people tackle such decision making situations intuitively and which cognitive strategies they follow thereby.
This work aims to give a detailed overview about the relating literatures at first. Then decision making processes in portfolio decision situations are experimentally investigated regarding to behavioural aspects, in this case concerning knapsack problems, with the application of the methodology verbal protocol analysis. Concrete heuristics which subjects were following during the decision process could be identified and classified under the terms of certain criterions for further analysis. Hereby verbal protocol analysis helped to collect good and applicable data for determining specific behaviour of people in portfolio decision processes.
Table of Contents
1 Introduction
2 Literature Review
2.1 Financial Portfolio Optimization
2.2 Resource Allocation
2.3 Decision Analysis
3 Theory of the Experimental Framework
3.1 Knapsack Optimization Problem
3.2 Laboratory Experiment
3.3 Verbal Protocol Analysis
4 Methodology
4.1 Experimental Design
4.1.1 Task
4.1.2 Participants
4.1.3 Experimental Procedure
4.2 Encoding Process
4.3 Analyzing Process
5 Results
5.1 Optimality and Iteration
5.1.1 Optimality α within heuristic groups
5.1.2 Optimality α regarding type of calculation
5.1.3 Optimality α regarding verbalizing effects
5.1.4 Optimality α with or without overview
5.1.5 Iterating steps
5.2 Heuristics and Metrics
5.2.1 Heuristics
5.2.2 RRS2 and DRP2
5.2.2.1 Rank-Range-Part (RRS2) and Data-Range-Part (DRP2) with Updating
5.2.2.2 Outcome
5.2.3 ARS2
5.2.4 Behavioural Aspects
6 Conclusion
Research Objectives and Themes
This thesis aims to experimentally investigate human decision-making processes within the context of portfolio decision analysis and resource allocation, specifically focusing on the knapsack problem. By employing verbal protocol analysis, the research seeks to identify and classify the cognitive heuristics and strategies used by subjects when making allocation decisions under uncertainty and complexity.
- Behavioral Operations Management in portfolio selection
- Application of Verbal Protocol Analysis (VPA) to track thought processes
- Investigation of decision heuristics for the 0-1 Knapsack Problem
- Analysis of optimality and strategy adherence in resource allocation
Excerpt from the Book
3.3 Verbal Protocol Analysis
The verbal protocol analysis is a think aloud method that requires participants to verbalize or rather talk aloud his/her thoughts while solving a problem or performing a task and also state aloud the line of reasoning they are using to go from the observations to their decision. The goal of think-aloud research is to give the researcher detailed insight into the processes of working memory, as the theory of Ericsson and Simon (1980) regarding verbal protocols was based on the distinction between working memory, in which concurrent reasoning takes place in verbal form, and long-term memory, where some of the ideas from working memory could eventually be stored, not necessarily in words. To understand how these verbal protocols could be obtained, Figure 3 shows a simple model of the human cognitive system which is responsible for the thinking processes and verbalizations:
Summary of Chapters
1 Introduction: This chapter introduces the research context, highlighting the shift in operations management toward understanding human behavior and decision-making strategies in portfolio and resource allocation tasks.
2 Literature Review: The chapter provides a comprehensive review of existing research on portfolio optimization, resource allocation, and decision analysis, establishing the theoretical framework for behavioral experiments.
3 Theory of the Experimental Framework: This section details the mathematical model of the knapsack problem, the rationale for laboratory experiments, and the application of verbal protocol analysis as a method for tracing cognitive processes.
4 Methodology: The chapter outlines the experimental design, the task assigned to participants, the demographic background of the subjects, the procedures for encoding protocols, and the processes used for analyzing results.
5 Results: This chapter presents the empirical findings regarding participant optimality, the heuristics applied, the impact of various calculation methods and overview conditions, and an in-depth analysis of behavioral patterns.
6 Conclusion: The final chapter summarizes the research findings, discusses the validity of the applied methodology, and identifies implications for future behavioral operations research.
Keywords
Operations Management, Portfolio Decision Analysis, Knapsack Problem, Behavioral Operations, Verbal Protocol Analysis, Heuristics, Resource Allocation, Cognitive Strategies, Decision Making, Optimality, Think Aloud Method, Uncertainty, Risk, Human Behavior, Decision Support
Frequently Asked Questions
What is the core subject of this thesis?
The thesis investigates human decision-making behavior in the context of portfolio and resource allocation problems, specifically using the 0-1 knapsack problem as a model.
What are the primary themes discussed?
Central themes include the gap between normative mathematical models and actual human behavior, the application of various intuitive heuristics, and the impact of decision aids and task complexity.
What is the main research objective?
The goal is to experimentally observe and analyze the cognitive strategies and decision processes people follow when tasked with resource allocation, determining how effectively they perform with their chosen heuristics.
Which methodology is employed in this research?
The study utilizes the Verbal Protocol Analysis (VPA) method, where participants are asked to think aloud, verbalizing their reasoning and thought processes while making decisions.
What is covered in the main body of the work?
The body covers a comprehensive literature review, the theoretical background of the knapsack problem, the detailed design of the laboratory experiment, and an extensive analysis of the resulting data.
Which keywords characterize this work?
Key terms include Operations Management, Behavioral Operations, Knapsack Problem, Decision Analysis, Heuristics, and Verbal Protocol Analysis.
Why is the knapsack problem used for this experiment?
The knapsack problem serves as a representative yet complex resource allocation task that allows for the observation of clear decision strategies and optimality under defined constraints.
What role does the 'overview' play in the decision process?
The research finds that participants who possess a complete overview of the items and the budget before making selections perform significantly better than those who do not.
Does verbalization influence the decision-making process?
While some participants found the verbalization process difficult, the study indicates that it provided essential data to trace their reasoning, though the experimental setting was specifically designed to minimize negative impacts on performance.
How does task complexity influence heuristic usage?
Increased task complexity, such as higher correlation between items, leads to more strategy changes and a higher likelihood that participants will use calculators or Excel to manage their decision-making process.
- Arbeit zitieren
- Yi Li (Autor:in), 2013, Experimental Investigation of Human Decision Processes in Portfolio Decision Analysis, München, GRIN Verlag, https://www.grin.com/document/310819
