Impact of Loss and Gain Forecasting on the Behavior of Pricing Decision making
Recent forecasting research has shown a paradigm shift from algorithm aversion to appreciation. Despite growing trust in technological decision support, business decisions are often made based on gut feeling and intuition, ignoring part or all of the available data and information. Creating effective decision support solutions necessitates the understanding of the impact of emerging artificial intelligence and machine learning technologies on business decision making processes. This study examines whether forecasting information delivery at a time when a business decision is made influences or changes the decision maker's mind, thereby leading to a different decision. The study employs a 2 x 2 between subject experimental setting where forecasted results (gain/loss) and automated advice (risk/certainty) were crossed examined. A sample of 137 participants was asked to make four different product price change decisions assisted by automated decision aid. The experiment involved two independent samples, one taken from Amazon Mechanical Turk workers and the other from the members of LinkedIn managerial groups. Results show that decision makers are more likely to rely on automated recommendation and change their initial decision when forecasted decision outcomes lead to gain, whereas they would discount algorithmic aid if a loss is forecasted. This research adds to the extant literature in the field of human technology interactions and contributes to the descriptive and prescriptive decision theories by illustrating that gain forecasting has a higher impact on the algorithm appreciation than loss forecasting.