Personality Traits as Predictors of Cognitive Biases in the Evaluation of Public Bids

Abstract

The expected utility theory predicts that people choose options with maximum utility value over alternative options. However, the current study uses the Big Five personality inventory, lottery choice model, and multiple price list to examine whether the personality traits of public bid evaluators predict cognitive biases (loss aversion, status quo bias, and the framing effect) that potentially result in suboptimal decision-making in the evaluation of competitive bids. Suboptimal decision-making within this context refers to the tendency to opt for choices that fail to maximize the greatest aggregate value relative to total cost of ownership (TCO). Data collected from participants (N = 350) in a personally administered survey was evaluated to test the hypotheses. Multiple regression analysis confirmed that personality traits predict risk aversion, R2 = .164, F(5, 344) = 13.47, p = .000, and status quo bias, R2 =.069, F(5, 344) = 5.06, p = .000. Individuals high in neuroticism and conscientiousness personality traits are more likely to exhibit risk (or loss) aversion and status quo bias. No statistically significant association was found between personality traits and the framing effect. Keywords: Personality traits, cognitive biases, risk (loss) aversion, status quo bias, framing effect, expected utility theory, prospect theory.