Generative AI for Managerial Decision-Making under Ambiguity and Sycophancy

Abstract

Generative artificial intelligence (GenAI) is increasingly being integrated into complex business workflows, fundamentally shifting the boundaries of managerial decision-making. However, the reliability of its strategic advice in ambiguous business contexts remains a critical knowledge gap. To address this gap, this study compares multiple GenAI models in their ability to detect ambiguity, examines whether a systematic ambiguity-resolution process improves response quality, and investigates their susceptibility to sycophantic behavior when confronted with flawed managerial directives. Using a novel four-dimensional business ambiguity taxonomy, we conducted a human-in-the-loop experiment across strategic, tactical, and operational scenarios. The resulting decisions were assessed through a human-validated automated evaluation framework based on agreement, actionability, justification quality, and constraint adherence. The results show that our approach not only distinguishes different types of ambiguity, but also reveals how ambiguity resolution systematically changes model behavior. In particular, resolving ambiguities improved decision quality across all managerial levels, with the strongest gains observed in constraint adherence. The analysis further showed that sycophantic behavior is not uniform across models: some models challenged flawed assumptions, whereas others tended to comply with them. This study contributes to the bounded rationality literature by positioning GenAI as a cognitive scaffold that can detect and resolve ambiguities managers might overlook, while demonstrating that its artificial limitations require human oversight to ensure its reliability as a strategic partner.