Quantifying the cost of decision fatigue: suboptimal risk decisions in finance

Making decisions over extended periods of time is cognitively taxing and can lead to decision fatigue, which linked a preference for the ‘default’ option, namely whatever involves relatively little cognitive effort. Such effects have been demonstrated across number applied settings, including forensic clinical contexts. Previous research, however, has not quantified cost such suboptimal decisions. We assessed magnitude negative consequences fatigue in finance sector. Using 26 501 credit loan applications evaluated by officers major bank, we show that this real-life financial risk-taking context approvals course day decreased during midday compared with early or later workday, reflecting default option. To quantify economic loss associated variability, then modelled bank's additional collection if all had made morning levels approval. This would resulted $509 023 extra revenue one month. Thus, provide further evidence consistent pattern it substantial impact sector warrants considerations counteract it.