Professor
Office:
A310 Academic Center
Office Hours:

By appointment

Phone:
660-7850
E-Mail:

ATTN: Behavior Decision Theory class information (BA925) has been moved to: fuqua.instructure.com

 

Our first class meeting will be on Wednesday, August 31, 2016 in Fuqua's Seminar Room G. Class will meet from 9:00 a.m. - 11:30 a.m.  Each week we will discuss approximately 4-5 articles.

My assistant is Bobbie Clinkscales (919-660-7862), workspace A422B Academic Center.  She has uploaded the syllabus and all associated articles, and will load weekly Power Point slides to Fuqua's new module, Canvas: fuqua.instructure.com. 

The information below is not current and will be removed soon.

Schedule of Topics and Readings


**This schedule is tentative. We will take longer than one class session on some topics depending on class interest. We may also read a few additional papers depending on student interest.) Therefore, if you have to miss a class be sure to check with me or one of your fellow students on what will be needed to be read for the following week.

Class Session #1 (8/26/2015) - Introduction: 1) Course Overview, 2) Bounded Rationality, and 3) Two Systems of Thought. Depending on how much time is spent on the introduction, we may start the section on decision making under risk.

  1. Simon, H.A. (1955). A behavioral model of rational choice. Quarterly Journal of Economics, 69, 7-19. [Some would argue that this paper is the foundation paper for the field of BDR.]
  2. Shah, A. J. & Oppenheimer, D. M. (2008). Heuristics made easy: An effort-reduction framework. Psychological Bulletin, 134, 207-222. [This article builds upon the paper by Simon (1955). This paper also provides a recent, and good, example of a “literature review” with a theoretical perspective. Keep in mind for your class paper.]
  3. Chapter 1 from Kahneman (2011) Thinking, Fast and Slow.

Questions to think about:

  1. How would you judge a decision as a “good” one? More generally, what defines “rationality” in judgment and choice?
  2. What does the concept of “bounded rationality” mean? How does it differ from the assumptions about decision making found in most economic textbooks?
  3. What are some of the differences between System 1 and System 2 thinking? How might those two systems interact in making judgments and choices?
  4. What is a judgment heuristic?

Class Session #2 (9/2) – Decisions Under Risk. Please treat the next 3 class sessions as one unit. The three papers listed below are the ones that most need to be read for the first class in this unit of the course.

  1. Wu, G., Zhang, J., & Gonzalez, r. (2004). Decision under risk. Chapter in Koehler, D..*Harvey, N. Blackwell Handbook of Judgment and Decision Making. (This chapter provides background on this area of research.)
  2. Kahneman, D. & Tversky, A. (1979). Prospect Theory: An analysis of decision under risk. Econometrica, 47, 263-291. [This article is the most cited article ever in this leading economics journal.]
  3. Tversky, A. & Kahneman, D. (1992). Advances in Prospect theory: Cumulative representation of uncertainty. Journal of Risk and Uncertainty, 5, 297-323. (This article elaborates on and extends the ideas of Prospect Theory as presented in the 1979 paper.)

Questions to think about:

  1. What are the differences and similarities between expected utility and prospect theory?
  2. How important is the distinction between risk and uncertainty?
  3. How might problems that you are interested be thought of in terms of decision making under risk (uncertainty)?

Class Session #3 (9/9) – Alternative Perspectives on Risk Taking. Note, I need to leave this class early (around 10:15 am) for a trip to California.

  1. Pachur, T., Hertwig, R., & Wolkewitz, R. (2014). The affect gap in risky choice: Affect-rich outcomes attenuate to probability information. Decision, 1, 64-78. (This article illustrates how of the key concepts of Prospect Theory has been expanded over the years. It also illustrates some nice experimental work.)
  2. Brandstatter, E. & Gigerenzer, G. (2006). The priority heuristic: Making choices without tradeoffs. Psychological Review, 113, 409-432. (This article and the next one illustrate efforts to examine heuristics in risky choice behavior.)
  3. Venkatraman, V, Payne, J.W. & Huettel, S.A. (2014). An Overall Probability of Winning Heuristic for Complex Risky Decision Processes: Choice and Eye Fixation Evidence. Organizational Behavior and Human Decision Process, 125, 73-87. (In addition to illustrating another risky choice heuristic this article illustrates a form of process-tracing in decision research, i.e., eye movement tracking.)

Questions to think about:

  1. What kinds of heuristics might people use in solving risky decision problems?
  2. How might eye-tracking be used in studying decision problems of interest to you?

Class Session #4 (9/16) – Wrap class on Decision under Risk and Uncertainty.

  1. Weber, E.U. & Hsee, C. (1988). Cross-cultural differences in risk perception, but cross-cultural similarities in attitudes towards perceived risk. Management Science, 44, 1205-1217.
  2. Pachur, T. & Scheibehenne, B. (2012). Constructing preference from experience: The endowment effect reflected in external information search. Journal of Experimental Psychology: Learning, Memory & Cognition, 38, 1108-1116.

Questions to think about:

  1. How do the motivational factors involved in risky choice relate to the earlier papers on affect and reason?
  2. How might emotions and cognition relate to risk taking?
  3. What are decision behaviors beyond endowment effects that might be influenced by loss aversion?
  4. What cross-cultural differences in decision behavior might exist?

Class Session #5 (9/23) – Probabilistic Reasoning I: Heuristics and Biases. (This material will most likely extend over the next three class sessions.)

  1. Tversky, A. & Kahneman, D. (1974). Judgment under uncertainty: Heuristics and biases. Science, 185, 3-20. (This may be the most influential article on subjective probability judgments ever written. If there was one article that is responsible for the popularity of BDR this is it.)
  2. Tversky, A. & Kahneman, D. (1983). Extensional versus intuitive reasoning: The conjunctive fallacy in probability. Psychological Review, 90, 293-315. [This paper, in my opinion, gives the best introduction to the "heuristics and biases" perspective on subjective probability judments. What is the logic of studying judgment by focusing on errors in reasoning?]
  3. Klayman, J., Soll, J.B., Gonzales, Vallejo, C. & Barlas, S. (1999). Overconfidence: It depends on how, what, and whom you ask. Organizational Behavior and Human Decision Processes, 79, 216-247. (Overconfidence is one of the most studied judgmental biases. Follow-up papers, not required to be read, are Soll, J. & Klayman, J. (2004). Overconfidence in interval estimates. Journal of Experimental Psychology: Learning, Memory & Cognition, 30, 299-314 and Tsai, C.I., Klayman, J. & Hastie, R. (2008). Effects of amount of information on judgement accuracy and confidence. Organizational Behavior and Human Decision Processes, 107, 97-105.), and Mannes, A.E. & Moore, D.A. (2013). A behavioral demonstration of overconfidence in judgment, Psychological Science. See also Fast, N.J., Sivanathan, N., Mayer, N.D. & Galinsky, A.D. (2012). Power and overconfident decision making. Organizational Behavior and Human Decision Processes, 117, 249-260.
  4. Simmons, J.P. & Nelson, L.D. (2006). Intuitive confidence: Choosing between intuitive and nonintuitive alternatives. Journal of Experimental Psychology: General, 135, 409-428. (This paper illustrates the use of a mixture of experimental and "real-world" data. Some of the best papers over the past decade have used a mixture of methods of study.)

Questions to think about:

  1. What areas of business, law, medicine, etc., might be influenced by overconfidence effects?
  2. With probability judgments, how you ask the questions matters a lot. Try to think of examples applied to your area of study.
  3. What tasks in the applied fields you are interested in are most likely to be influenced by judgmental heuristics?

Class Session #6 (9/30) – Probabilistic Reasoning II.

  1. Gigerenzer, G., Czeslinski, J. & Martignon, L., (1999). How good are fast and frugal heuristics? Decision Science and Technology reprinted in T. Gilovich, D. Griffin & D. Kahneman (Eds.) Heuristics and Biases (2002). Gigerenzer and his colleagues have strongly advocated the study of the heuristics used in judgment and choice but from a different perspective than Kahneman and Tversky. See Gigerenzer & Brighton (2009, Topics in Cognitive Science) for a recent summary of this program of research.
  2. Kahneman, D. & Frederick, S. (2002). Representatives revisted: Attribute substitution in intuitive judgment. In T. Gilovich, D. Griffin & Brighton (Eds.) Heuristics and biases: The Psychology of Intuitive Judgment. Cambridge University Press. See also chapters in Kahneman (2011), particularly chapter 9.
  3. Payne, J.W., Sagara, N., Shu, S.B., Appelt, K.C. & Johnson, E.J. (2013). Life expectation: A constructed belief? Journal of Risk and Uncertainty.

Questions to think about:

  1. What is your opinion about the research approaches of Kahneman and Tversky and Gigerenzer? Why, for example, might the use of heuristics that use less information, computation, and time might improve judgmental accuracy as well as lead to systematic biases?
  2. Recently it was argued that "If one were to attempt to identify a single problematic aspect of human reasoning that deserves attention above all others, the confimation bias would have to be among the candidates for consideration? Do you agree? Why?
  3. What are some of the unanswered questions that you see in terms of probabilistic reasoning? Please come to class with questions you have about this section of the course.

Class Session #7 (10/7) – Judgment with Multiple Cues and Summary of the section on thinking under uncertainty. (Social Judgment (SJT) or "policy capturing" is one of the most active areas of BDR. The first two papers for this week illustrate the SJT approach.)

  1. Lusk, C.M. & Hammond, K.R. (1991). Judgment in a dynamic task: Microburst forecasting. Journal of Behavioral Decision Making, 3, 55-73. [While this is an "old" paper it does a good job of illustrating the SJT approach in the context of a "real-world" judgment problem.]
  2. Harries, P., Tomlinson, C., Notley, E., Davies, M. & Gihooly, K. (2012). Effectiveness of a decision-training aid on referral prioritization capacity: A randomized control trial. Medical Decision Making. (This is a newer policy capturing paper. It is not a major paper but it does illustrate the ongoing application of policy capturing methods.
  3. Kuncel, N.R., Klieger, D.M. & Ones, D.S. (Algorithm for hiring. (May 2014). Harvard Business Review. (Thisis a very short article but it does illustrate teh argument for replacing a man with a model for decision making.)
  4. Stanovich, K.E.,& West, R.F. (2008). On the relative independence of thinking biases and cognitive ability. Journal of Personaliity and Social Psychology, 94, 672-695. (The topic of individual differences in decision making has taken on renewed importance in the last few years with efforts to improve decision making.)
  5. Hogarth, R.M., Mukherjee, K & Soyer, E. (2013). Assessing the chances of success: Naive statistics versus kind experience. Journal of Experimental Psychology: Learning, Memory & Cognition. 39, 14-32. (This paper makes at least three points worth thinking about. The first is the use of an additive strategy rather than the proper application of subjective probability judgments to entry decisions faced by entrepreneurs and others. Third, it talks about different types of decision aids.)

Questions to think about:

  1. What tasks (problems) that you are interested in could be studied using the methods (policy capturing0 of Lusk and Hammond?
  2. Might there be cultural as well as individual differences in rational thought?

*Depending on how quickly we cover material, the session on probabilistic reasoning may be extended. If the section on probabilistic reasoning is extended then the three following classes will be pushed back a week.

Class Session #8 (10/14) – Preferences and deadling with Conflicting Objectives: Basic Tasks, Models, and Modes of Thought. [This class will extend over to the next week.]

  1. Tversky, A. (1972). Elimination by aspects: A theory of choice. Psychological Review. 79, 281-299. (This paper illustrates one of many choice heuristics for multi-attribute, multi-alternative choice.)
  2. Payne, J.W., Bettman, J.R. & Johnson, E.J. (1988). Adaptive strategy selection in decision making. Journal of Experimental Psychology: Learning, Memory and Cognition. 14, 534-552. (This paper and the next one also represent a "package." Again, also think about the multiple methods that are being used.)
  3. Broder, A. & Schiffer, S. (2006). Adaptive flexibility and maladaptive routines in selecting fast and frugal decision strategies. Journal of Experimental Psychology: Learning, Memory and Cognition, 32, 904-918.
  4. Dijksterhuis, A., Bos, M.W., Nordgren, L.F. & van Baaren, R.B. (2006). On making the right choice: The deliberation-without-attention effect. Science, 311, 1005-1007. (This paper has generated a lot of follow-on research and a lot of attention in the press. It and the following paper should be read together.)
  5. Payne, J.W., Samper, A., Bettman, J.R. & Luce, M.F. (2008). Boundary conditions on unconscious thought in complex decision making. Psychological Science, 19, 1118-1123.

Questions to think about:

  1. A compensatory process is often viewed as the "rational" way to deal with problems involving conflicting objectives. Do you agree? If not, why not?
  2. Why would people use noncompensatory decision strategies even if the strategies are not fully rational?
  3. What is the difference between output and process methods in the study of decisions?
  4. How might conscious and unconscious thought differ in terms of decision making? When might one form of thought be better?

Class Session #9 (10/21) – Task and Context Effects. (The great influence that seemingly minor changes in decision tasks and contexts play in decision behavior is one of the key findings of BDR.)

  1. Tversky, A., Sattath, S. & Slovic, P. (1988) Contingent weighting in judgment and choice. Psychological Review, 95, 371-384.
  2. Hsee, C.K., Zhang, J., Wang, L. & Zhang, S. (2013). Magnitude, time and risk differ similarly between joint and single evaluations. Journal of Consumer Research, 40, 172-184.
  3. Tversky, A. & Simmons, I. (1993). Context-dependent preferences. Management Science, 10, 1179-1189. (There has been much interest in Marketing in trying to incoporate context effects into a choice model, see Rooderkerk, R.P., Van Heerde, H.J., & Bijmolt, T.H.A. (2011, Journal of Marketing Research for an example of this effort.)
  4. Pochesptsova, A., Amir, O., Dhar, R. & Baumeister, R.F. (2009). Deciding without resources: Resource depletion and choice in context. Journal of Marketing Research, 46, 344-355.
  5. Halpern, S.D., et.al. (2013) Default options in advance directives influence how patients set goals for end-of-life care. Health Affairs, 32, 2, 408-417. (This is an example of an attempt to test a "nudge" to impact decisions.)

Questions to think about:

  1. If A is preferred to B under some circumstances while B is preferred to A under other circumstances, do people really have preferences to be measured?
  2. What factors should impact the size of task and context effects?
  3. Does Halpern et. al. paper raise ethical questions related to nudging people?

Class Session #10 (10/28) – Emotions and Other Issues in Multi-Attribute Judgment and Choice.

  1. Luce, M.F. (1998). Choosing to avoid: Coping with negatively emotion-laden consumer decisions. Journal of Consumer Research, 24, 409-433.
  2. Shiv, B., et. al. (2005). Investment behavior and the negative side of emotion. Psychological Science, 16, 435-439.
  3. Lerner, J.S., Li, Y, Piercarlo, V. & Kassam, K.S. (2015) Emotion and decision making. Annual Review of Psychology, 66, 799-823.

Questions to think about:

  1. What are the differences between cognitive and emotional factors in decision-making?
  2. How do affect and reason react in judgment and choice?
  3. This is the last class for this part of the course, you should think about questions you might have about the material that has been covered.

Class Session #11 (11/4) – Time preferences (discounting the future) This is a particular form of trade-off decision that has gotten a lot of attention in the literature of both theoretical and applied perspectives.)

  1. Urminsky, O. & Zauberman, G. (in press). The psychology of intertemporal preferences. Wiley-Blackwell Handbook of Judgment and Decision Making.
  2. Weber, E.U., Johnson, E.J., Milch, K.F., Chang, J.C., Brodscholl, J.C., & Goldstein, D. G. (2007). Asymmetric discounting in intertemporal choice: A query-theory account. Psychological Science, 18, 516-523.

Class Session #12 (11/11) – Outsmarting Biases. (I will make reference to efforts to improve decision making throughout the course but this session will focus on this topic.)

  1. Soll, J.B., Milkman, K.L. & Payne, J.W. (May, 2015). Outsmart your own biases. Harvard Business Review, 64-71. (This article and the next one represent a "package of ideas on how to improve decisions.)
  2. Beshears, J. & Gino, F. (May, 2015). Leaders as decision architects. Harvard Business Review, 52-62.
  3. Wilson, T.D. & Brekke, N. (1994). Mental contamination and mental correction: Unwanted influences on judgments and evaluations. Psychological Bulletin, 116, 117-142. [This article makes clear how difficult it can be to eliminate judgmental biases.]
  4. Benartzi, S. & Thaler, R.H. (2007). Heuristics and biases in retirement savings behavior. Journal of Economic Perspectives, 21, 81-104. This paper illustrates how BDR might impact public policy debates.
  5. Blumenthal-Barby, J.S., et. al. (2013). Decision aids: When 'nudging' patients to make a particular choice is more ethical than balanced, nondirective content. Health Affairs, 32, 2, 303-310. (This article puts forward a controversial perspective on nudges.)

Questions to think about:

  1. What are the implications of the psychology of decision behavior for efforts to improve decisions? In particular, what do you think about the relative merits of trying to change the decision maker versus changing the decision environment in trying to improve human decisions?
  2. Why might people not use decision aids?
  3. Are there ethical issues in the use of nudges that may reflect System 1 thinking?

Class Session #13 (11/18) – Group Decision Behavior. A complete course could be done on this topic. This class will provide just a brief introduction. (We may not get to this class depending on quickly we cover the material above.)

  1. Stasser, G. & Titus, W. (2003). Hidden profiles: A brief history. Psychological Inquiry, 14, 304-313.
  2. Sunstein, C. & Hastie, R. (December, 2014). Making Dumb Groups Smarter. Harvard Business Review,
  3. Herzog, S. M., & Hertwig, R. (2014). Think twice and then: Combining or choosing in Dialectical Bootstrapping? Journal of Experimental Psychology: Learning, Memory, and Cognition, 40, 218-232.

Questions to think about:

  1. When will 2 or more heads be better than 1 head in making a decision?
  2. When might groups amplify biases in judgment and choice?
  3. What could be done to improve group decision processes?
  4. What 3 decision problems do you think should be investigated next by the BDR field?

Class Session #14 (12/2) – Wrap Up. This class will be used for a wrap session and to finish up any topics not covered. There are no readings for this class.

 

RECOMMENDED BOOKS

Popular Books:

Below are some popular books that are based on behavioral decision research. These books are highly recommended. The past few years has seen a rapid growth in best-selling books written for general public that deal with behavioral decision research topics.

Ariely, D. (2008) Predictably Irrational: The hidden forces that shape our decisions. Harper Collins. A best-selling book on behavioral economics by one of Fuqua's own. I highly recommend that you watch a video by Dan on decision making that can be found on ww.Ted.com/talks.

Makridakis, S., Hogarth, R., & Gaba, A. (2009). Dance with change: Making luck work for you. One World Publications.

Thaler, R. H. & Sunstein, C. R. (2008). Nudge: Improving decisions about health, wealth, and happiness. Yale University Press. One of the authors, Cass Sunstein, use to be the new Czar for regulation in the Obama administration.

Lewis, M. (2004). Moneyball: The art of winning an unfair game. (Paperback version.) This is not a book on decision behavior research. However, it is a fun read on intuitive judgment versus statistical reasoning.

Bernartzi, S. & Lewis, R. (2012). Save More Tomorrow: Practical Behavioral Solutions to Improve 401(k) Plans. Portfolio/Penguin. This book applies BDR concepts to the important problems of helping people to save for their retirement. I helped in the writing of this book so I am not an unbiased evaluator but I do think it provides a good example of how the ideas presented in this class are now being used to try and improve people's lives.

Heath, C., Heath, D. (2013). How to Make Better Choices in Life and Work. Crown Business. The Heath brothers offer a simple four-stage process for improving decision making based on a deep understanding of why people make poor choices.


Research and Text Books:

Hastie, R. & Dawes, R.M. (2009, 2ed). Rational Choice in an Uncertain World. Sage Publications. An easy to read and good overview of the psychology of judgment and decision making. If you want to look at just one textbook, I recommend this one.

Lichtenstein, S. & Slovic, P. (2006). (Eds.) The Construction of Preferences. Cambridge University Press.  A large collection of articles supporting the idea that preferences are often “constructed”.

Payne, J. W., Bettman, J. R., & Johnson, E. J. (1993). The Adaptive Decision Maker, Cambridge University Press. This book is getting old, but it provides a framework for understanding when, and how, people decide how to decide. Perhaps to be expected, much of the course will draw upon the concepts in this book.