Managers use numerical data as the basis for many decisions. This research investigates how data on prior advertising expenditures and sales outcomes are used in budget allocation decisions and attempts to answer three important questions about data-based inferences. First, do biases exist that are strong enough to lead to seriously suboptimal decisions? Second, do graphical data displays, real-world experience, or explicit training reduce any observed biases? Third, are the observed biases well explained by a relatively small set of natural heuristics that managers use when making data-based allocation decisions? The results suggest answers of yes, no, and yes, respectively. The authors identify three broad classes of heuristics: difference-based (which assess causation by comparing adjacent changes in expenditures to changes in sales), trend-based (which assess causation by comparing overall trends in expenditures and sales), and exemplar-based (which emulate the allocation pattern of the observations with the highest sales). All three heuristics create biases in some situations. Overall, exemplar-based heuristics were used most frequently and induced the greatest biasing of the three (sometimes allocating the most to an advertising medium that was uncorrelated with sales). Difference-based heuristics were used less frequently but generated the most extreme allocations. Trend-based heuristics were used the least.

This research examines how credit card debt affects consumer spending. In five experimental and field studies, the authors demonstrate that outstanding credit card debt increases spending for consumers with high self-control. They also show that this effect can be eliminated by increasing the available credit on the credit card. Thus, when the available credit is low, consumers with greater self-control increase spending, but when the available credit is high, they reduce spending. The results extend the literature on goal violation and self-control and offer insights into consumer decision making and consumption patterns under conditions of debt.

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and the three anonymous JMR reviewers for their helpful comments on previous versions of this article. Portions of this research were part of a doctoral dissertation at the University of Pennsylvania. The Wharton School funded this research.