When Time Is Money: Decision Behavior under Opportunity-Cost Time Pressure

regulatory rules (Eisenhardt, 1989) and often involve Decison-making dilemmas can arise because errors stress due to the need to make choices under time presmay result either from deciding too soon or from desure. However, such time stress is often due not so laying decisions too long. Delay can result in lost opmuch to strict deadlines as it is to the potential opporportunities or reductions in payoffs from the most actunity cost of delaying decisions. As Eisenhardt (1993, curate decision. This paper investigates decision prop. 121) notes, ‘‘the decision-making dilemma in such cesses in environments where there is time stress due environments comes from the fact that it is easy to to the opportunity cost of delaying decisions. First, make mistakes by deciding too soon and equally inefusing computer simulation, the relative accuracy of fective to delay choices or to imitate others.’’ In particualternative decision strategies is examined in environlar, delay in deciding can result ‘‘in failure as. . .winments that differ in terms of the levels of opportunity cost of delay. The lexicographic choice rule is shown dows of opportunity close’’ (Eisenhardt, 1993, p. 121). to be a very attractive decision process in situations In some cases, the longer the delay in making the deciwhere there is opportunity-cost time pressure. Two exsion, the lower the expected return (value) from even periments test the adaptivity of actual decision behavthe most accurate of decisions. For example, if a comior to the presence or absence of opportunity-cost time pany delays a new product introduction to get test marpressure along with variations in goals (accuracy emket results, competitors may observe the test, develop phasized vs. effort savings emphasized), dispersion in their own versions of the product, and introduce these probabilities or weights across the outcomes of the versions before the first company finishes test marketchoice options, and the degree of correlation among ing (Ono, 1995). More generally, the company’s prosthe outcomes. Subjects were generally adaptive to oppects may continuously degrade with delay; the longer portunity-cost time pressure. However, failures in the delay, the more effective competitors’ responses adaptivity were identified when choice environment may be. properties with conflicting implications for adaptation were present simultaneously. In particular, under We investigate decision making under situations opportunity-cost time pressure, subjects received a where there is opportunity-cost time pressure. We are lower expected payoff when the goal was to emphasize interested in how people adapt their decision-making choice accuracy than when the goal was to emphasize strategies (Payne, Bettman, & Johnson, 1993) when savings in effort. The question of when adaptivity in faced with opportunity-cost environments and in the decision making might fail is discussed. q 1996 Academic possible limits or even failures in adaptivity that may Press, Inc. arise in such environments. In particular, we focus on how people decide when there are conflicts between the INTRODUCTION processing implications of opportunity costs and the implications of other variables such as goals and the ‘‘High-velocity’’ environments are characterized by degree of conflict (intercorrelation) between outcomes. rapid changes in technology, demand, competitors, or Next, we review prior research on decision making under time pressure. Then we summarize an accuracy– This research was supported by a grant from the Decision, Risk, effort framework for adaptive decision behavior and and Management Science Program of the National Science Foundareport a simulation study of decision strategies based tion. Address reprint requests to John W. Payne at the Fuqua School of Business, Duke University, Box 90120, Durham, NC 27708-0120. on that framework. Using the simulation results and