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2014/2015  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
Course period 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 - MPP
Contact information: https:/​/​e-campus.dk/​studium/​student-hub/​aabningstider-og-kontaktinformation
Main academic disciplines
  • Business psychology
  • Management
  • Economics, macro economics and managerial economics
Last updated on 13-04-2015
Learning objectives
Students will develop a good understanding of individual and group decision making under risk and uncertainty, and will be able to apply their knowledge to real-world decision making and risk management situations.

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.
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 December/January
Aids allowed to bring to the exam Limited aids, see the list below and the exam plan/guidelines for further information:
  • Books and compendia brought by the examinee
  • Notes brought by the examinee
  • Allowed calculators
  • Allowed dictionaries
Make-up exam/re-exam
Another examination form
Make-up/re-exam is a 20 minutes individual oral examination of the whole subject.
Description of the exam procedure

Dictionaries, including multi-language dictionaires, are allowed.  

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, cognitive limitations and biases, and contextual factors affect risk perceptions, decision making, and related behaviours . Using problems and several case studies we will discuss ways to improve decision making and risk management processes. 


Teaching methods
Class sessions will include a mixture of lectures, small group discussions, whole-class discussion, and case analysis. Cases discussed will be from a variety of organisational settings; it is very important to read assigned cases prior to class. Homework assignments will be given to provide an opportunity to practice and apply concepts from the course; these assignments are not graded. 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.
Expected literature

Anticipated literature (or  similar, to be finalized in the course syllabus)


The Psychology of Judgment and Decision Making, Scott Plous, McGraw Hill, 1993  

Austin, L. and Fischhoff, B. (2010).  Consumers’ collision insurance decisions: A mental models approach to theory evaluation. Journal of Risk Research, 13(7), 895-911 


Austin, L.. University of California San Diego: A cancer cluster in the literature building?

Baron, J. 2008. Normative theory of choice under uncertainty, in Thinking and Deciding, Fourth Edition.  Cambridge: Cambridge University Press, Chapter 10, pp 233-256
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.
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

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. InDecision Making in Health Care: Theory, Psychology and Applications, G. Chapman (ed), Cambridge University Press, pp 20-36


Schwartz, Barry. The tyranny of choice. Scientific American, April, 2004, 71-75. 


Shiv, B., et.al. (2005). Investment behavior and the negative side of emotion. Psychological Science, 16, 435-439.


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.

Thaler, Richard H. and Cass R. Sunstein. (2003).  Libertarian Paternalism. The American Economic Review Vol. 93, No. 2, Papers and Proceedings of the One Hundred Fifteenth Annual Meeting of the American Economic Association, Washington, DC, January 3-5, 2003 (May, 2003), pp. 175-170.

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.

Vogel, Gretchen. (2004). The Evolution of the Golden Rule. Science, 20 February 2004: Vol. 303 no. 5661 pp. 1128-1131

Last updated on 13-04-2015