Warrington College of Business Administration
Fall 1999 (Module 2)
Managerial Decision Making:
Perspectives from Behavioral Decision Research
(GEB 6930)
Professor Lyle Brenner
Office: Bryan 214
Phone: 392-0161 x1427
Office Hours: Wednesdays 1:00pm – 2:30pm (or by appt)
Email: lyle@dale.cba.ufl.edu
Class Hours/Location: Tues/Thurs 12:50pm – 2:45pm (Periods 6-7), Stuzin 102
WWW Page:
http://bear.cba.ufl.edu/brenner/geb6930/index.html
Overview
In this class we will explore what constitutes high-quality decision making, how managers (and
consumers) tend to fall short of these standards in predictable ways, and how your decision making can be
systematically improved. I hope to provide you with an opportunity to (a) change the way you think about
decisions in general, and also (b) diagnose potential shortcomings in your decision process. The overall
goal is to help improve the quality of decisions you make in both your professional and personal life.
We will consider insights about decision-making from the fields of economics, marketing, organizational
behavior, statistics, and psychology, with considerable emphasis placed on psychological approaches to
understanding judgment and decision making under conditions of uncertainty.
The following is a partial list of course objectives:









Identify quality decision making and provide you with a rational approach to structuring and thinking
about decisions.
Investigate decisions with conflicting objectives and how to reconcile these objectives.
Clearly separate the roles of beliefs and values in making decisions where uncertainty is present.
Understand principles for evaluating the quality (or lack thereof) of decisions.
Understand chance processes and uncertainty, so that you are better able to distinguish outcomes that
are within your control from those that are not.
Identify typical shortcomings in the judgment process and provide some solutions to help you
overcome these shortcomings.
Understand the importance of decision framing, so that you are able to avoid inconsistencies in your
own choices and anticipate inconsistencies in the behavior of others.
Explore the nature of risk and uncertainty, how they influence decisions, and how they can be better
managed.
Better understand the decision-making processes of your customers and competitors.
1
Required Readings


Russo, J.& Schoemaker, P. (1990). Decision Traps: The Ten Barriers to Brilliant Decision-Making
and How to Overcome Them. New York: Fireside. (R&S)
Hammond, Keeney, & Raiffa (1999). Smart Choices: A Practical Guide to Making Better Decisions.
Boston: Harvard Business School Press. (HKR)

Reading Packet (Available at Target Copy, 22 NW 13th St.)
1. Einhorn, H. & Hogarth, R. (1987). Decision making: going forward in reverse. Harvard Business
Review, Jan-Feb 1987, 66-70.
2. Tversky, A. & Gilovich, T. (1989). The cold facts about the “hot hand.” Chance, 2, 16-21.
3. Dawes, R. (1979). The robust beauty of improper linear models. American Psychologist, 34, 571-582.
(reprinted in KST, Chapter 28)
4. Tversky, A. & Kahneman, D. (1974). Judgment under uncertainty: Heuristics and biases. Science, 185,
1124-1131. (reprinted in KST, Chapter 1)
5. Keeney, R. (1994). Creativity in decision making with value-focused thinking. Sloan Management
Review, Summer 1994, 33-41.
6. Kahneman, D., Knetsch, J. & Thaler, R. (1990). The endowment effect, loss aversion, and the status
quo bias. Journal of Economic Perspectives, 5, 193-206.
7. Kahneman, D. & Tversky, A.(1984). Choices, values, and frames. American Psychologist,39, 341-350.
8. Thaler, R. (1985). Mental accounting and consumer choice, Marketing Science,4, 199-214.
9. Kahneman, D. & Lovallo, D. (1993). Timid choices and bold forecasts: A cognitive perspective on
risk-taking. Management Science, 39, 17-31.
10. Simonson, I. (1993). Get closer to your customers by understanding how they make choices.
California Management Review, 35, 68-84.
Note: Several of the assigned readings and many articles others of interest are collected in the following
recommended but optional edited volume:
 Kahneman, D., Slovic, P., & Tversky, A. (1982). Judgment under uncertainty: Heuristics and biases.
Cambridge: Cambridge University Press. (KST)
2
Course Requirements
1. Class Participation (25%)
As usual, quality of your contribution is valued more than quantity. Yes, there will be cold calling.
Attendance is naturally very important. Criteria for your participation grade will include:
a) Attendance
b) Preparation for discussions
c) Quality of comments in class discussions
d) Thoughtfulness of work done in class exercises
2. Short Weekly Written Assignments (25%)
Throughout the module, you will submit brief written answers to questions posed in class. (Each will be
one-page, 400 words maximum, and you will include the word count on the page.) You will get one
freebie: i.e., you’ll get to drop your lowest score for these assignments.
3. Paper: Topic Illustration (25%)
Before December 3 you will submit a short paper (1500 words maximum), illustrating one or more
concepts covered in class or in the readings. The content of the paper is up to you -- it may be drawn from
your professional, educational, and personal experiences, or from the media.
For an illustration drawn from the media, you will find a newspaper or magazine article, excerpt from a
book, or a video tape segment from a film or television show, etc. that illustrates one or more principles
from class or the readings, and discuss and analyze its relevance to material that we cover in this course.
The topic illustration will be graded based on the validity, quality, clarity, and insightfulness of your
description and analysis, as well as the “interestingness” and/or importance of the example chosen.
The topic illustration is due by 5:00 pm on December 3 -- no exceptions!
3. Final Exam (25%)
The final exam (Tuesday, December 14, 12:50--2:45pm) will be a straightforward exam that will test your
understanding of basic concepts and tools from class and the readings.
3
Approximate Schedule of Topics
I will assume that you have read the relevant material prior to coming to class. I will often direct your
attention to the most important parts of the assigned readings.
The composition and order of topics below is only a guideline; we may deviate from it as circumstances
and evolving interests of the class dictate.
Topics and Themes
Readings
Introduction: A framework for thinking about decisions
What makes decisions easy/hard/good/bad?
Descriptive, normative, and prescriptive approaches
R&S Intro, Ch 1
HKR Ch 1, 2
Chance, control, and learning from experience
Looking forward and back
(Mis)perceptions of chance
Illusory correlation
Learning about cause and effect
R&S Ch 8, 9
Tversky & Gilovich
Einhorn & Hogarth
Looking ahead: Prediction and probability judgment
Intuitive and model prediction
Heuristics and biases; overconfidence
R&S Ch 4, 5; Dawes
Tversky & Kahneman (1974)
Building decisions: Frames and values
Framing; status quo and endowment effects
Creativity in problem structuring
R&S Ch 2, 3; Kahneman et al;
Keeney; HKR Ch 3, 4
Decision making under uncertainty
Integrating beliefs and values; Expected utility theory
Prospect theory; loss aversion; nonlinear decision weights
R&S Ch 6
Kahneman & Tversky (1984)
Applications of prospect theory
Mental accounting
Isolation errors
Thaler
Kahneman & Lovallo
Reasons, conflict, and consumer choice
Reason-based choice
Conflict and tradeoffs
Context effects
Simonson
HKR Ch 5, 6
Other Topics
Group decision making
Decision making over time
Ethical Issues
R&S Ch 7
HKR Ch 9
4