An Exploratory Study of Heuristics for Anticipating Prices

Timo Ehrig, Konstantinos V. Katsikopoulos*, Jürgen Jost, Gerd Gigerenzer

*Corresponding author for this work

Research output: Contribution to journalJournal articleResearchpeer-review

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Purpose: This research explores how investment and central bankers cope with strategic uncertainty when they anticipate prices. The uncertainty originates from others' decisions and their consequences, and cannot be meaningfully reduced to risk. The authors postulate that, in order to cope with this type of uncertainty, bankers use simple rules, also called heuristics. This study aims to identify such heuristics and the psychological processes that underlie them.
Design/methodology/approach: The authors interviewed 22 managers of teams tasked to anticipate prices, in two leading investment and central banks. The primary data came from in-depth, semi-structured interviews lasting 30–60 min, supplemented by our observations during the on-site visits, emails and phone calls when preparing the interviews, and reports published by the banks. Data were coded and heuristics were induced over multiple rounds by multiple researchers.
Findings: Bankers (1) construct simple game representations of markets, (2) make inferences to gauge opponents, (3) become alert when they see too much agreement and (4) communicate coherent narratives. Heuristics (1)–(3) are employed when the pace of decision-making is fast, whereas (4) is used for longer time scales. In sum, bankers exhibit reciprocal bounded rationality, wherein interaction partners are mutually aware of and adapted to the fundamental uncertainty of the task and their limited resources.
Originality/value: Heuristics for anticipating prices have not been studied empirically outside the lab. The findings may help integrate conceptualizations of heuristics in the simple-rules and fast-and-frugal-heuristics research programs and improve market efficiency.
Original languageEnglish
JournalManagement Decision
Issue number7
Pages (from-to)1750-1761
Number of pages12
Publication statusPublished - 2021

Bibliographical note

Published online: 29 June 2021.


  • Banking
  • Cognition
  • Decision making
  • Heuristics
  • Interviews
  • Uncertainty

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