Department of Industrial Engineering & Decision Analysis [ IEDA Seminar ] - Present Bias in Operations

Present bias, especially without self-awareness, causes significant loss of utility in operational decisions. This loss arises from poor task choice and procrastination. This work considers the effect of present bias in a simple scheduling system that requires decisions about project timing and sequencing. We design algorithms that enable optimization of revenue less cost under present bias for both naive and sophisticated (i.e., self-aware) decision makers. We describe managerial insights about the relative performance of time-consistent, naive, and sophisticated decision makers, and how to mitigate the effects of present bias. Both theoretical and computational results support these insights. [Hall and Liu, POM 32 (2023) 1743-1759.]

We address present bias by employing deadlines in a backward recursion procedure for task choice and timing. This identifies critical times at which task choice and timing tradeoffs are evaluated, leading to a closed-form characterization of a schedule under imperfect self-awareness. Task completion times increase monotonically or change cyclically with deadlines under different self-awareness levels. We show computationally how the level of self-awareness and the time-consistent discount factor influence utility loss. Finally, we propose and evaluate a reasonable scheme for developing self-awareness of present bias. [Hall and Liu, WP 7/2023.]

Project management is responsible for almost 30% of the world's economic activity, with an annual value of $27 trillion. We show that the traditional explanation for project lateness, i.e. Parkinson's Law, is insufficient and present bias is a better explanation. We therefore design and test an incentive scheme to mitigate the effect of present bias. [Shi, Hall and Cui, OR 71 (2023).].