Understanding indirect effects in competitive environments

We argue that the failure to consider fully the role of indirect effects on a decision-maker's outcomes is a fundamental error in human judgment. Indirect effects are variables that interact with a decision-maker's decisions and actions to affect the outcome that the decision-maker will receive. We assert that two common types of indirect effects in competitive environments are the decisions of other parties and the rules of the game. Using protocol analyses, we show that decision-makers in competitive contexts commonly fail to consider fully these indirect effects explains common decision failures that have been previously observed in studies of three distinct competitive problems: the Monty Hall game (Nalebuff, 1987), the Acquiring a Company problem (Samuelson & Bazerman, 1985), and Multi-party ultimatums (Messick, Moore, & Bazerman, 1977). Finally, we suggest that our indirect effects perspective can explain and improve our understanding of many additional, and seemingly disparate, decision-making failures. Keywords: perspective taking, indirect effects, focusing, bonded rationality, Monty Hall, Acquiring a Company, ultimatums.