Behavioral Economics & Decision Making

Why do investors sell winning stocks too early and hold on to losing ones? Why do customers prefer unlimited plans, even when they would pay less on a pay-per-use plan? And why are experienced experts often more confident than they are accurate? This course examines how psychological variables affect economic outcomes, and how to use those insights in marketing, management, and business, as well as in your own life. The course has two facets. First, it gives a broad overview of important findings from the behavioral sciences (e.g., social and cognitive psychology, consumer research) that show how people really make decisions, in contrast to the rational models underlying classical economic theory. Second, it focuses on how to recognize and navigate these behavioral patterns in your organization and in your own decisions. Through case studies, guest lectures, and discussion, we will examine strategies to reduce the risk that biases pose to important decisions, learn methods that practitioners use to change behavior, and design choices, products, and policies that work with human tendencies rather than against them. Class time combines lectures, exercises, in-depth case analyses, and engaging peer discussion, so you will learn from your classmates' varied professional experience as well as from the research. Grading will be based on class participation, individual case write-ups, other assignments, and a final exam.