Instructor Room No. Office Hours Email Telephone Secretary/TA TA Office Hours Course URL (if any) DISC 323 Decision Behavior Fall Semester 2017 Fahad Mehmood 3 28, SDSB Building Fahad.mehmood@lums.edu.pk Suraj.lums.edu.pk COURSE BASICS Credit Hours 3 Lecture(s) Nbr of Lec(s) Per Week 2 Duration 75 min. each COURSE DISTRIBUTION Core This is a core course for MGS majors COURSE DESCRIPTION There are two aspects to Decision behavior : (1) how do we as humans make decisions? and (2) what can be done to improve decision making? This course especially intends to enable management science students to answer these questions about themselves and specifically apply them to managerial contexts. As business professionals, we need to what may lead us to make the wrong decisions. Hence, the course discusses the various types of biases and heuristics people use, the effects of bounded rationality, with in depth focus on certain common management related biases. Available solutions from research are also presented. COURSE PREREQUISITE(S) DISC 212 Introduction to Management Science Note: the material in these courses is only background knowledge (e.g. when does probability assessment apply to business decisions). We will not be covering any technical tools or models in this course. COURSE LEARNING OBJECTIVES 2. Understand when not to apply certain common heuristics 3. Understand what types of attention focusing errors (bounded perception) give rise to biases 4. Understand how biases translate to problems in common managerial contexts 5. Be aware of available strategies to LEARNING OUTCOMES Upon completion of the course, students will be able to 1. Identify and name common human biases 2. Have better control of their own decision making and judgment processes 3. Identify certain biases when presented with real life situations 4. Demonstrate understanding of strategies that are needed to (not necessarily to execute them themselves, but will have a foundation to develop such skills or be able to work with those who need to lead such changes in organizations)
UNDERGRADUATE PROGRAM LEARNING GOALS & OBJECTIVES General Learning Goals & Objectives Goal 1 Effective Written and Oral Communication Objective: Students will demonstrate effective writing and oral communication skills Goal 2 Ethical Understanding and Reasoning Objective: Students will demonstrate that they are able to identify and address ethical issues in an organizational context. Goal 3 Analytical Thinking and Problem Solving Skills Objective: Students will demonstrate that they are able to identify key problems and generate viable solutions. Goal 4 Application of Information Technology Objective: Students will demonstrate that they are able to use current technologies in business and management context. Goal 5 Teamwork in Diverse and Multicultural Environments Objective: Students will demonstrate that they are able to work effectively in diverse environments. Goal 6 Understanding Organizational Ecosystems Objective: Students will demonstrate that they have an understanding of Economic, Political, Regulatory, Legal, Technological, and Social environment of organizations. Major Specific Learning Goals & Objectives Goal 7 (a) Discipline Specific Knowledge and Understanding Objective: Students will demonstrate knowledge of key business disciplines and how they interact including application to real world situations (Including subject knowledge). Goal 7 (b) Understanding the science behind the decision making process (for MGS Majors) Objective: Students will demonstrate ability to analyze a business problem, design and apply appropriate decision support tools, interpret results and make meaningful recommendations to support the decision maker Indicate below how the course learning objectives specifically relate to any program learning goals and objectives. PROGRAM LEARNING GOALS AND OBJECTIVES Goal 1 Effective Written and Oral Communication Goal 2 Ethical Understanding and Reasoning Goal 3 Analytical Thinking and Problem Solving Skills Goal 4 Application of Information Technology Goal 5 Teamwork in Diverse and Multicultural Environments Goal 6 Understanding Organizational Ecosystems Goal 7 (a) Discipline Specific Knowledge and Understanding Goal 7 (b) Understanding the science behind the decision making process COURSE LEARNING OBJECTIVES 2. Be aware of available strategies to 2. Be aware of available strategies to Be aware of available strategies to Understand how biases translate to problems in common managerial contexts COURSE ASSESSMENT ITEM Project, CP, Quizzes, Assignments, Exam All Items Participation in session on recent issues in the area Participation in Experiments
GRADING BREAKUP AND POLICY NOTE: 5% marks will be adjusted in one of the components per instructor s judgement. It will be communicated in class. Class Participation:... 10% Quiz(s):... 20% Assignments... 10% Research Paper:... 30% Mid Examination:... 25% EXAMINATION DETAIL Midterm Exam Yes/No:... YES Combine Separate:... Separate Duration:... 90 min. Exam Specifications:... Closed Book/Closed Notes Yes/No:... NO Final Exam COURSE OVERVIEW SESS. # TOPICS RECOMMENDED READINGS 1. Introduction B&M, Ch. 1 2. In class Experiment #1 3. Heuristics & Biases (1): Availability Heuristic B&M, Ch. 2, pp. 13 21 4. Heuristics & Biases (2): Representativeness (Bias 1 3) B&M, Ch. 2, pp. 21 25 5. Heuristics & Biases (3): Representativeness (Bias 4 5) B&M, Ch. 2, pp. 25 28 6. Heuristics & Biases (4): Confirmation (Bias 8 10) B&M, Ch. 2, pp. 28 35 7. 8. Heuristics & Biases (5): Confirmation (Bias 11 2) & Conclusion of Topic Bounded Awareness (1): Inattentional & Change Blindness B&M, Ch. 2, pp. 35 41 B&M, Ch. 3, pp. 42 47 + Problems 1 & 2 SESSION OBJECTIVE(S) a. Introduction to Subject b. Overview of Course & Assessment Experiential learning of impact of decision behavior on practical outcomes a. What is the availability a. What is the representativeness a. What is the representativeness a. What is the confirmation a. What is the confirmation a. What is bounded awareness? b. Experience bounded awareness problems
9. Lahore University of Management Sciences Bounded Awareness (2): Focalism & Boundedness in Groups 10. Bounded Awareness (3): Strategic Settings 11. Bounded Awareness (4): Auctions & Conclusions 12. In class Experiment #2/ Further Research Issues B&M, Ch. 3, pp. 48 51 + Problems 3 & 4 B&M, Ch. 3, pp. 51 55 + Problem 5 B&M, Ch. 3, pp. 55 61 + Review of Problems If any will be distributed before scheduled class a. Situations leading to bounded awareness b. Experience of more problems of this type a. More situations leading to bounded awareness b. More experience of problems of this type a. More situations leading to bounded awareness b. Integration of Module learning Integrative experiment that gives opportunity to apply concepts to self/ Further research issues not covered in the text related to Pre Mid 13. Discussion about papers If any will be distributed before scheduled class 14. Mid Term Exam 15. Project discussion (Proposal presentation) a. What is framing? 16. Framing & Reversal Preferences (1) B&M, Ch. 4, pp. 62 70 b. What is preference reversal? c. Framing of order and certainty 17. Framing & Reversal Preferences (2) 70 76 Mental Accounting of Transactional Utility and Endowment Effects, etc. 18. Framing & Reversal Preferences (3) 76 82 Omission bias, Status Quo; Rebate Bonus Framing; Joint/Separate preference reversal 19. Motivational & Emotional Influences (1) B&M, Ch. 5pp. 84 93 Reasons for self contradictory preferences; Positive Illusions 20. Motivational & Emotional Influences (2) 94 100 Sources of emotional influence on Decision making 21. Escalation of Commitment (1) B&M, Ch 6,101 108 Concepts of Unilateral & Competitive Commitment Paradigms 22. Escalation of Commitment (2) 109 112 Sources of Escalation Commitment 23. Common Investment Mistakes (1) Ch 7,136 142 Examples of resulting Investment Mistakes 24. Common Investment Mistakes (2) 142 150 More examples of resulting Investment Mistakes 25. Improving Decision Making (1) Ch 8, 179 189 Role of Decision Analysis Tools 26. Improving Decision Making (2) 189 199 27. In class Experiment #3/ Further Research Issues 28. Course Review #1 29. Course Review #2 Role of Expertise & Debiasing Techniques
TEXTBOOK(S)/SUPPLEMENTARY READINGS [BM] Bazerman, M.H. & Moore, D.A. Judgment in Managerial Decision Making 8 th Edition, Wiley Other readings: 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 bestselling books written for general public that deal with behavioral decision research topics. Ariely, D. (2008) Predictably Irrational: The hidden forces that shape our decisions. Harpe Collins. A bestselling book on behavioral economics. 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. 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. 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.