1. Introduction to behavioral decision making

Concepts: behavioral econ, decisions; systems 1 and 2; intuition; heuristics.

  • Read Bazerman & Moore, Ch 1, the book is here. Save the book.
  • Read Gladwell, Blink chapters – intuitive decisions
  • Ariely: What is behavioral economics? – big think
  • The science of thinking – fast and slow systems, 12m video
  • Thinking fast and slow by Kahneman – animated 1
  • Thinking fast and slow: cognitive biases – animated 2
  • Thinking fast and slow: more biases – animated 3
  • System 1 and 2 thinking – with applications to management
  • Slides from class 1 – pdf
  • HW1:  After doing the readings & watching the videos for this module, respond to the following questions (2-3 pages single-spaced).  
  • 1) Explain what is system 1 and system 2 thinking. Give examples of situations when do you personally rely on intuitive snap judgments, and situations you rely on a more controlled, systematic, deliberate analysis.  When do you find system 1 to be most effective, and when is it better not to rely on it?  
  • 2) Based on Gladwell’s book ‘Blink’, what are his examples of situations when snap judgements can be more accurate than System 2 decisions? Why might it be the case?
  • 3) Suppose there is a proposal to replace workplace hiring system with a review of applicants’ resume and a skills test, and to eliminate in-person interviews. Given what you have learned about Systems 1 and 2, explain why you think this hiring method work better or worse than an interview.

2. Cognitive biases

Concepts: ease of recall, retrievability, base rate, sample size, chance, regression to the mean, conjunctive & disjunctive events, confirmation bias, anchoring, overconfidence, hindsight, the curse of knowledge

3. Framing

Concepts: framing, risk, uncertainty, endowment effect, selective attention, mental accounting, status quo bias, preference reversal & commitment, optimism & positive illusions, self-serving

4.  Motivations, emotions, escalation of commitment

5.  Fairness and ethics

  • Read Bazerman & Moore, Ch  7

6. Investments and consumer choices

7. Negotiations 

  • Read Bazerman & Moore, Ch 9,10
  • Slides on negotiations – pdf
  • HW7: Explain any 5 lessons that you learned from these chapters regarding negotiations. 

8. Improving decision making