Can LLMs Help Improve Analogical Reasoning For Strategic Decisions? Experimental Evidence from Humans and GPT-4

This study investigates whether large language models, specifically GPT4, can match human capabilities in analogical reasoning within strategic decision making contexts. Using a novel experimental design involving source to target matching, we find that GPT4 achieves high recall by retrieving all plausible analogies but suffers from low precision, frequently applying incorrect analogies based on superficial similarities. In contrast, human participants exhibit high precision but low recall, selecting fewer analogies yet with stronger causal alignment. These findings advance theory by identifying matching, the evaluative phase of analogical reasoning, as a distinct step that requires accurate causal mapping beyond simple retrieval. While current LLMs are proficient in generating candidate analogies, humans maintain a comparative advantage in recognizing deep structural similarities across domains. Error analysis reveals that AI errors arise from surface level matching, whereas human errors stem from misinterpretations of causal structure. Taken together, the results suggest a productive division of labor in AI assisted organizational decision making where LLMs may serve as broad analogy generators, while humans act as critical evaluators, applying the most contextually appropriate analogies to strategic problems.

Modeling AI-Human Collaboration as a Multi-Agent Adaptation

We develop an agent-based simulation to formalize AI-human collaboration as a function of task structure, advancing a generalizable framework for strategic decision-making in organizations. Distinguishing between heuristic-based human adaptation and rule-based AI search, we model interactions across modular (parallel) and sequenced (interdependent) tasks using an NK model. Our results reveal that in modular tasks, AI often substitutes for humans - delivering higher payoffs unless human expertise is very high, and the AI search space is either narrowly focused or extremely broad. In sequenced tasks, interesting complementarities emerge. When an expert human initiates the search and AI subsequently refines it, aggregate performance is maximized. Conversely, when AI leads, excessive heuristic refinement by the human can reduce payoffs. We also show that even "hallucinatory" AI - lacking memory or structure - can improve outcomes when augmenting low-capability humans by helping escape local optima. These results yield a robust implication: the effectiveness of AI-human collaboration depends less on context or industry, and more on the underlying task structure. By elevating task decomposition as the central unit of analysis, our model provides a transferable lens for strategic decision-making involving humans and an agentic AI across diverse organizational settings.