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2015/2016  BA-BPSYV1018U  Decision Making and Risk Management

English Title
Decision Making and Risk Management

Course information
Language English
Course ECTS 7.5 ECTS
Type Elective
Level Bachelor
Duration One Semester
Start time of the course Autumn
Timetable Course schedule will be posted at calendar.cbs.dk
Study board
Study Board for BSc/MSc in Business Administration and Psychology, BSc
Course coordinator
  • Laurel Austin - Department of Strategic Management and Globalization (SMG)
Contact information: https:/​/​e-campus.dk/​studium/​student-hub/​aabningstider-og-kontaktinformation
Main academic disciplines
  • Management
  • Business psychology
  • Economics
Last updated on 11-12-2015
Learning objectives
To achieve the grade 12, students should meet the following learning objectives with no or only minor mistakes or errors: Students will develop their ability to think logically and analytically about decision and risk situations at the individual, group, and societal levels. They will also understand and be able to recognize cognitive limitations in how people make decisions, and suggest ways to overcome them. They will be able to use normative models of decision making, apply principles of risk management, and use simple probability information in analysing a decision situation.

Learning Objectives:
At the end of the course, the student must be able to:
  • Demonstrate comprehensive understanding of the ideas/theories/concepts covered in the course.
  • Demonstrate the ability to appropriately apply those ideas/theories/concepts to decision situations.
  • Provide structure to decision situations based on theories from the class, and use that structure to analyze and discuss decision situations.
  • Recognize common cognitive limitations and biases that affect human inference, decision making, and risk management, as well as ways to overcome or limit them.
  • Know how to interpret and use basic probabilistic/statistical information when making decisions that involve uncertainty.
Examination
Decision making and risk management:
Exam ECTS 7,5
Examination form Written sit-in exam
Individual or group exam Individual
Assignment type Written assignment
Duration 4 hours
Grading scale 7-step scale
Examiner(s) One internal examiner
Exam period Winter
Aids allowed to bring to the exam Limited aids, see the list below:
  • Books and compendia brought by the examinee
  • Allowed dictionaries
  • Allowed calculators
  • Notes in paper format brought by the examinee
  • Access to personal drive (S-drive) on CBS' network
  • USB key to upload your notes before the exam
  • Access to all information on CBSLearn
Make-up exam/re-exam
Another examination form
Make-up/re-exam is a 20 minutes individual oral examination of the whole subject.
Course content and structure

The quality of our judgement and decision making processes influences the economic, health and welfare, and organizational outcomes that we, as well as others impacted by our decisions, experience. This course will provide students with a rich foundation in inter-disciplinary descriptive research that examines people’s actual judgement and decision making processes when faced with risk and uncertainty, as well as theoretical research that proposes normative models of how people oughtto make decisions.  The research we will examine draws on insights from cognitive, experimental, social, and organizational psychology, economics, game theory, statistics, and decision analysis.  The course provides a foundational knowledge for the fields of behavioural decision theory, behavioural economics and behavioural finance.  Students will learn and apply a variety of theories related to individual decision making and risk management, strategic decision making, and group and social decision making and risk management.  We will examine how emotions and cognitive limitations and biases, and contextual factors affect risk perceptions, decision making, and related behaviours.  We will examine cooperation and competition in social dilemmas. Using problems and several case studies we will discuss ways to improve decision making and risk management processes.
Teaching methods
The course will be a mixture of lectures and case discussions. Students are expected to be actively involved in discussions; in this way students are best able to learn from each other, as well as the instructor. Students should come to class prepared, having read assigned materials.
Further Information

BA-BPSYV1018U Decision Making and Risk Management
Expected literature

The Psychology of Judgment and Decision Makingby Scott Plous, McGraw Hill, 1993  (or a similar text book to be determined.)
 
 Austin, L. and Fischhoff, B. (2010).  Consumers’ collision insurance decisions: A mental models approach to theory evaluation. Journal of Risk Research. 
 
Aven, T. and O. Renn. (2009).  On risk defined as an event where the outcome is uncertain. Journal of Risk Research, 12:1, 1-11.
 
Baron, J. 2008. Normative theory of choice under uncertainty’ Thinking and Deciding, Fourth Edition.  Cambridge: Cambridge University Press, Chapter 10, pp 233-256
  
Dawes, R.  1979.  The robust beauty of improper linear models in decision making.  American Psychologist, July 1979, pp 571-582
 
Edmondson, A. 2002. Group Process in the Challenger Launch Decision (A), HBS Case 9-603-068
  
Downs, J., W. Bruine de Bruin, and B. F.  2008. Parents’ vaccination comprehension and decisions. Vaccine (2008) 26, 1595—1607
 
Fischhoff, B., Nadaï, and I. Fischhoff (2001).  Investing in Frankenfirms. The Journal of Psychology and Financial Markets,  2 (2):100-111
  
Gigerenzer, G. and Goldstein, D. 1996.  Reasoning the fast and frugal way: Models of bounded rationality.  Psychological Review, 103(4), 650-669
 
Hardin.  (1968).  The Tragedy of the Commons.  Science, v 162, 1243-1248.

Hastie and Dawes, 2010.  ‘What is decision making?’ in Rational Choice in an Uncertain World, 2nd ed., Chap 2, pp 23-43. Thousand Oaks: Sage.
 
Krishnamurti, T., Eggers, S. and Fischhoff, B. 2008).  The impact of over-the counter availability of ‘‘Plan B’’ on teens’ contraceptive decision making.  Social Science in Medicine.  67: 618-627.  
 
Lovallo, D. & Kahneman, D. 2003. Delusions of Success: How Optimism Undermines Executives’ Decisions, Harvard Business Review, 81(7), pp.56-63. 

Ostrom, E., et al. (1999).  Revisiting the Commons: Local Lessons, Global Challenges.  Science, April 1999, Vol. 284 no. 5412 pp. 278-282
 
Patterson, K., (2002, May 5).  What doctors don’t know (almost everything).  New York Times Magazine.  
 
Renn, O.  (2006).  Risk Governance: Towards an integrative approach (White Paper).  IRGC, Geneva.  Pp 20-26.

Roberts M.  and Sonnenberg, F. (2003).  Decision Modeling Techniques. In Decision Making in Health Care: Theory, Psychology and Applications, G. Chapman (ed), Cambridge University Press, pp 20-36
 
Simon, H. (1979).  Rational Decision Making in Business Organizations. The American Economic Review, v 69, No4 (Sept), 493-513.
 
Slovic, P. and Peters, E.  (2006).  Risk perception and affect.  Current directions in psychological science, 15 (6): 322-325.
 
Thaler, R. (1985).  Mental accounting and consumer choice.  Marketing Science, 4, 199-214.
 
Tversky A., and Kahneman, D (1971).  Belief in the law of small numbers.  Psychological Bulletin, 76:2, 105-110.
 
Tversky A., and Kahneman, D (1981). The framing of decisions and the psychology of choice.  Science, 211, 453-458.
 
 
Last updated on 11-12-2015