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2013/2014  BA-HA_HU6G  Psychology of decision-making - We are not irrational, are we?

English Title
Psychology of decision-making - We are not irrational, are we?

Course information
Language English
Exam ECTS 7.5 ECTS
Type Elective
Level Bachelor
Duration Summer
Course period Summer
Time Table Please see course schedule at e-Campus
Study board
Study Board for BSc in Economics and Business Administration
Course coordinator
  • Course instructor - Kinga Konczey, Corvinus University of Budapest
    Patricia Plackett - Department of Operations Management (OM)
Main academic disciplines
  • Business psychology
  • Communication
  • Management
Last updated on 07-05-2013
Learning objectives
At the end of the course students should be able to:
  • Understand the major decision making theories as they apply to various business and management settings, and be able to apply these theories to the analysis of problems, situations and develop effective problem solving strategies.
  • Identify and describe the mental models that underlie our thinking processes;
  • Effectively utilize the advocacy and inquiry method to understand our way of reasoning;
  • Effectively prepare for team work or problem solving in interaction through situational awareness, self assessment, and the assessment of the other party(ies);
  • Understand and effectively deal with stress situations, including the choice of appropriate stress management techniques;
  • Recognise crisis situations and effectively approach them by using appropriate strategies and techniques;
  • Identify problem situations and assess uncertainty;
  • Recognise the various processes that lead us to be "less than rational" in our decision making;
  • Recognise and overcome the limitations and inconsistencies in our decision making;
  • Effectively deal with ambiguity and develop strategies to deal with different levels of ambiguity in problem solving;
  • Understand the role of intuition in the decision making process;
  • Develop creative problem solving strategies both individually in team settings, and apply them.
Course prerequisites
English proficiency (speaking, comprehension and writing) is required. I will also assume that students had already studied - and will build upon students' knowledge and understanding of – at least one of the following topics and subjects: Organisational Behaviour and/or Management and/or Human Resource Management. Work experience is a bonus.
Prerequisites for registering for the exam
Compulsory assignments (assessed approved/not approved)
Mandatory Mid-term Assignment: A 2-3 page reflective paper will need to be submitted on individual problem-solving or decision- making experiences, and course concepts should be applied in the analysis of the situation. With this paper students may practice the depth of analysis required for the final project and receive feedback on how to improve.
Examination
Home project assignment:
Examination form Home assignment - written product
Individual or group exam Individual
Size of written product Max. 10 pages
Assignment type Written assignment
Duration Written product to be submitted on specified date and time.
Grading scale 7-step scale
Examiner(s) One internal examiner
Exam period Summer Term
Make-up exam/re-exam
Same examination form as the ordinary exam
Course content and structure
A policeman sees a drunk staring at the ground beneath a streetlight. "What are you doing?" "the cop asks. "Looking for my keys."says the drunk. "I dropped them in the dark alley over there." "Then why are you looking for them over here? "asks the policeman, confused. "Oh, because the light's so much better over here."
Having completed business or management education, most of us are searching for the keys to adaptive decision making "under the streetlight": in classrooms, and other controlled environments with clear metrics and practical tools. Rigorous analytical methods can help us in well-ordered situations. For many of us, however, what we were taught about making tough choices quickly falls apart, because real-world situations aren't well structured. In the unstructured, ambiguous, dynamic situations we often face, basing our actions on these conventional claims about decision-making can be useless. We have to rely on our experience, intuition and expertise instead, and look for a different set of solutions.
This course will focus on ambiguous situations that are difficult to comprehend, and where conventional methods don’t work. We will contrast normative and descriptive theories of reasoning, judgment, and decision-making. We will explore assessments of risk and uncertainty, including research on calibration, hypothesis testing, and heuristics and biases. We will approach decision situations from the individual’s perspective, through the different lenses of individual personalities and styles. We will see how decisions are actually made and how these processes differ from the best, or optimal, methods for decision-making. 
 
Course structure:
This interactive, pragmatic course focuses on the individual as a less-than-perfect decision-maker in competitive and cooperative contexts. The course examines how individuals process uncertainty and how they make decisions based on information they obtain from the environment, and how they take risks. In-class simulations and out-of-class assignments will be employed to provide experience and understanding of decision-making concepts and to help to develop new skills in a variety of contexts.

Course content:
  • thinking about thinking - discovering and understanding the way our mind works;
  • mental models, ladder of inference, advocacy and inquiry - understanding our way of reasoning;
  • stress management, responding to crisis;
  • problem-solving and decision-making; assessing uncertainty;
  • rationality concept - are we "irrational"?; various rationality concepts;
  • limitations and inconsistencies in decision-making;
  • concepts of fairness, preference reversals and heuristics;
  • dealing with ambiguity, creative decision-making
  • interactive problem-solving and decision-making - negotiation

The course's development of personal competences:
The course will help to develop personal competences through discussions, examples, and in-class exercises.  Focus will be on the following areas: 

  • Enhancing effectiveness by learning the keys to rational thinking, as well as the barriers of optimal decision-making;
  • Identifying personal decision-making competencies and styles and recognizing the styles and strategies of others within and across cultures;
  • Achieving better outcomes by strengthening decision-making skills;
  • Determining how these concepts, skills and competencies can be applied in the workplace.
Teaching methods
Class sessions will consist of a variety of activities including lectures, team work and discussions, projects, and in-class exercises. There will be significant emphasis on experiential learning processes including small group discussions, inventories and tests, problem-solving exercises, games, case studies, role plays, along with home assignments designed to apply concepts to work situations. Students play an active part as they plan, simulate, negotiate, obtain feedback, evaluate their own decision-making problems, and discuss decision, and competitive strategies.

Since personal and professional development (i.e., awareness and skill-building) through in-class and out-of-class activities is the ultimate objective of the subject, attendance and continuous work is very important. If there is any business and/or international situation that catches your attention I would encourage you to bring it up in class for discussion. On each session significant individual, team and class work will be performed, work that cannot be substituted for by checking others’ notes or any other means of ‘catching up’ with the missed class. I will expect that students come to each class having completed the readings and skill-building assignments, with comments and questions in hand. Asking questions, challenging theories, each other (and the lecturer), defending own arguments, offering examples, and acting as a spokesperson are all essential to the learning process. The lecturer is a facilitator and students need to be an important part of the learning model.

Preliminary Assignment: Short reflective analysis of personal decision making style: based on tests and class material from the fist two classes.
Expected literature
The book used for the class: Gary Klein (2009) Streetlights and Shadows: Searching for the Keys to Adaptive Decision Making. A Bradford Book The MIT Press. Cambridge, MA

Compendium (will be made available for purchase)
  1. Noel M. Tichy and Warren G. Bennis: Making Judgment Calls - The ultimate act of leadership.Harvard Business Review, Oct 2007. pp. 94-101 (9)
  2. Ashraf, N., Camerer, C. F., & Loewenstein, G (2005). Adam Smith, Behavioral Economist.Journal of Economic Perspectives, 19 (13), 131–145.
  3. Kirby, L. Psychological Type and the Myers-Briggs Type Indicator. in Developing Leaders: Research and Applications in Psychological Type and Leadership Development. Davies-Black Publishing. California (15)
  4. Senge P. Mental Models (1992) adapted from Chapter 10 Senge: The Fifth Discipline: The Art and Practice of the Learning Organization (New York: Doubleday/Currency) (12)
  5. Arnold, J. and Randall, R. (2010): Stress and Well-Being ad Work. in Work Psychology: Understanding Human Behavior at the Workplace. 5th Ed. Pearson (34)
  6. Mintzberg, H., Westley, F. (2001); Decision making: It's not what you think.MIT Sloan Management Review; Cambridge; Spring 2001; Vol: 42; Issue: 3; Page: 89-93 (5)
  7. *Cooksey, R. W. (2000). Mapping the texture of managerial decision making: A complex dynamic decision perspective.Emergence, 2 (2). 102-122 (21) [on LEARN]
  8. Snowden, D.J., and Boone, M. E. (2007) A leader’s framework for decision making.Harvard Business Review, November 2007, 69-76 (8)
  9. Harvey, J. B. (1988). The Abeline Paradox: The management of agreement. Organizational Dynamics, 1988 Summer, pp. 17-43 (12) 
  10. Eugene Sadler-Smith and Erella Shefy: The intuitive executive: Understanding and applying ‘gut feel’ in decision-making.Academy of Management Executive, 2004, Vol. 18, No. 4 
  11. Robert, B, and Lajtha, C (2002). A new approach to crisis management. Journal of Contingencies and Crisis Management. Vol 10., No 4. pp 181-191 (11) 
  12. *Matzler, K., Bailom, F., Mooradian, T. A.(2007) Intuitive Decision Making.MIT Sloan Management Review. Cambridge: Fall 2007. Vol. 49, Iss. 1; p. 13-16 (4) [on LEARN]
  13. Klein, G. (2004) The Power of Intuition – How to use your gut feeling to make better decisions at work. Chapter 2: a Case study on Intuition. First Currency Paperback Ed. (4)
  14. Hayashi, A. M. (2001). When to Trust Your Gut. Harvard Business Review, Feb 2001. pp. 58-65
  15. Coyne, K. P., Clifford, P. G. and Dye, R. (2007).Breakthrough thinking from inside the box.Harvard Business Review, December, 2007, 71-78 (8)
  16. **GOODWIN, P. & WRIGHT, G. 2009. Decision Analysis for Management Judgment. Chapter 10. (pp 237-263) Heuristics and biases in probability assessments. John Wiley and Sons
  17. Daniel Kahneman, Dan Lovallo, and Olivier Sibony: Before You Make That Big Decision…Harvard Business Review, June, 2011, 71-751-608 (10) 
  18. Gigerenzer, G. (2005): I think, Therefore I Err.Social Research. Vol 72. No 1. p.195-218 (24)
  19. Camillus, J. C.(2008) Strategy as a wicked problem. HBR, May 2008, 99-106 (8)
 
Case studies will be provided at the beginning of the course on LEARN.
 
Recommended readings:
Harvard Business Essentials, Decision Making: 5 Steps to Better Results by Business Essentials Harvard (Paperback - Jan 31, 2006)
Ariely, Daniel. (2010) Predictably irrational (Expanded edition), Harper Perennial
Baron, Jonathon. (2008) Thinking and Deciding (4th Ed). Cambridge University Press.
Stanovich, Keith E. (2010) Decision making and rationality in the modern world. Oxford University Press.
The book used for the class: Gary Klein (2009) Streetlights and Shadows: Searching for the Keys to Adaptive Decision Making. A Bradford Book The MIT Press. Cambridge, MA
Compendium
1. Noel M. Tichy and Warren G. Bennis: Making Judgment Calls - The ultimate act of leadership. Harvard Business Review, Oct 2007. pp. 94-101 (9)
2. Ashraf, N., Camerer, C. F., & Loewenstein, G (2005). Adam Smith, Behavioral Economist. Journal of Economic Perspectives, 19 (13), 131–145.
3. Kirby, L. Psychological Type and the Myers-Briggs Type Indicator. in Developing Leaders: Research and Applications in Psychological Type and Leadership Development. Davies-Black Publishing. California (15)
4. Senge P. Mental Models (1992) adapted from Chapter 10 Senge: The Fifth Discipline: The Art and Practice of the Learning Organization (New York: Doubleday/Currency) (12)
5. Arnold, J. and Randall, R. (2010): Stress and Well-Being ad Work. in Work Psychology: Understanding Human Behavior at the Workplace. 5th Ed. Pearson (34)
6. Mintzberg, H., Westley, F. (2001); Decision making: It's not what you think. MIT Sloan Management Review; Cambridge; Spring 2001; Vol: 42; Issue: 3; Page: 89-93 (5)
7. *Cooksey, R. W. (2000). Mapping the texture of managerial decision making: A complex dynamic decision perspective. Emergence, 2 (2). 102-122 (21) [on LEARN]
8. Snowden, D.J., and Boone, M. E. (2007) A leader’s framework for decision making. Harvard Business Review, November 2007, 69-76 (8)
9. Harvey, J. B. (1988). The Abeline Paradox: The management of agreement. Organizational Dynamics, 1988 Summer, pp. 17-43 (12)
10. Eugene Sadler-Smith and Erella Shefy: The intuitive executive: Understanding and applying ‘gut feel’ in decision-making. Academy of Management Executive, 2004, Vol. 18, No. 4
11. Robert, B, and Lajtha, C (2002). A new approach to crisis management. Journal of Contingencies and Crisis Management. Vol 10., No 4. pp 181-191 (11)
12. *Matzler, K., Bailom, F., Mooradian, T. A.(2007) Intuitive Decision Making. MIT Sloan Management Review. Cambridge: Fall 2007. Vol. 49, Iss. 1; p. 13-16 (4) [on LEARN]
13. Klein, G. (2004) The Power of Intuition – How to use your gut feeling to make better decisions at work. Chapter 2: a Case study on Intuition. First Currency Paperback Ed. (4)
14. Hayashi, A. M. (2001). When to Trust Your Gut. Harvard Business Review, Feb 2001. pp. 58-65
15. Coyne, K. P., Clifford, P. G. and Dye, R. (2007). Breakthrough thinking from inside the box. Harvard Business Review, December, 2007, 71-78 (8)
16. **GOODWIN, P. & WRIGHT, G. 2009. Decision Analysis for Management Judgment. Chapter 10. (pp 237-263) Heuristics and biases in probability assessments. John Wiley and Sons
17. Daniel Kahneman, Dan Lovallo, and Olivier Sibony: Before You Make That Big Decision… Harvard Business Review, June, 2011, 71-751-608 (10)
18. Gigerenzer, G. (2005): I think, Therefore I Err. Social Research. Vol 72. No 1. p.195-218 (24)
19. Camillus, J. C.(2008) Strategy as a wicked problem. HBR, May 2008, 99-106 (8)
Case studies will be provided at the beginning of the course on LEARN.
Dec Psy / ISUP2013 / Konczey
version: April 2013 page 4
Recommended readings:
Harvard Business Essentials, Decision Making: 5 Steps to Better Results by Business Essentials Harvard (Paperback - Jan 31, 2006)
Ariely, Daniel. (2010) Predictably irrational (Expanded edition), Harper Perennial
Baron, Jonathon. (2008) Thinking and Deciding (4th Ed). Cambridge University Press.
Stanovich, Keith E. (2010) Decision making and rationality in the modern world. Oxford University Press.
The book used for the class: Gary Klein (2009) Streetlights and Shadows: Searching for the Keys to Adaptive Decision Making. A Bradford Book The MIT Press. Cambridge, MA
Compendium
1. Noel M. Tichy and Warren G. Bennis: Making Judgment Calls - The ultimate act of leadership. Harvard Business Review, Oct 2007. pp. 94-101 (9)
2. Ashraf, N., Camerer, C. F., & Loewenstein, G (2005). Adam Smith, Behavioral Economist. Journal of Economic Perspectives, 19 (13), 131–145.
3. Kirby, L. Psychological Type and the Myers-Briggs Type Indicator. in Developing Leaders: Research and Applications in Psychological Type and Leadership Development. Davies-Black Publishing. California (15)
4. Senge P. Mental Models (1992) adapted from Chapter 10 Senge: The Fifth Discipline: The Art and Practice of the Learning Organization (New York: Doubleday/Currency) (12)
5. Arnold, J. and Randall, R. (2010): Stress and Well-Being ad Work. in Work Psychology: Understanding Human Behavior at the Workplace. 5th Ed. Pearson (34)
6. Mintzberg, H., Westley, F. (2001); Decision making: It's not what you think. MIT Sloan Management Review; Cambridge; Spring 2001; Vol: 42; Issue: 3; Page: 89-93 (5)
7. *Cooksey, R. W. (2000). Mapping the texture of managerial decision making: A complex dynamic decision perspective. Emergence, 2 (2). 102-122 (21) [on LEARN]
8. Snowden, D.J., and Boone, M. E. (2007) A leader’s framework for decision making. Harvard Business Review, November 2007, 69-76 (8)
9. Harvey, J. B. (1988). The Abeline Paradox: The management of agreement. Organizational Dynamics, 1988 Summer, pp. 17-43 (12)
10. Eugene Sadler-Smith and Erella Shefy: The intuitive executive: Understanding and applying ‘gut feel’ in decision-making. Academy of Management Executive, 2004, Vol. 18, No. 4
11. Robert, B, and Lajtha, C (2002). A new approach to crisis management. Journal of Contingencies and Crisis Management. Vol 10., No 4. pp 181-191 (11)
12. *Matzler, K., Bailom, F., Mooradian, T. A.(2007) Intuitive Decision Making. MIT Sloan Management Review. Cambridge: Fall 2007. Vol. 49, Iss. 1; p. 13-16 (4) [on LEARN]
13. Klein, G. (2004) The Power of Intuition – How to use your gut feeling to make better decisions at work. Chapter 2: a Case study on Intuition. First Currency Paperback Ed. (4)
14. Hayashi, A. M. (2001). When to Trust Your Gut. Harvard Business Review, Feb 2001. pp. 58-65
15. Coyne, K. P., Clifford, P. G. and Dye, R. (2007). Breakthrough thinking from inside the box. Harvard Business Review, December, 2007, 71-78 (8)
16. **GOODWIN, P. & WRIGHT, G. 2009. Decision Analysis for Management Judgment. Chapter 10. (pp 237-263) Heuristics and biases in probability assessments. John Wiley and Sons
17. Daniel Kahneman, Dan Lovallo, and Olivier Sibony: Before You Make That Big Decision… Harvard Business Review, June, 2011, 71-751-608 (10)
18. Gigerenzer, G. (2005): I think, Therefore I Err. Social Research. Vol 72. No 1. p.195-218 (24)
19. Camillus, J. C.(2008) Strategy as a wicked problem. HBR, May 2008, 99-106 (8)
Case studies will be provided at the beginning of the course on LEARN.
Dec Psy / ISUP2013 / Konczey
version: April 2013 page 4
Recommended readings:
Harvard Business Essentials, Decision Making: 5 Steps to Better Results by Business Essentials Harvard (Paperback - Jan 31, 2006)
Ariely, Daniel. (2010) Predictably irrational (Expanded edition), Harper Perennial
Baron, Jonathon. (2008) Thinking and Deciding (4th Ed). Cambridge University Press.
Stanovich, Keith E. (2010) Decision making and rationality in the modern world. Oxford University Press.
Last updated on 07-05-2013