• Be familiar with the analytic concepts necessary to understand and analyze management decision making in different contexts
• Understand and appreciate the crucial importance of randomness and luck in strategic decision making
• Recognize (and name) predictable decision traps in their own decisions and decisions of others
• Have improved ability to make decisions themselves

This course is a good addition for students interested in strategy and decision making and applies cognitive and economic models to the analysis of decision making.

Business resolves around making decisions. Leaders, managers, and everybody else frequently need to make important decisions, often with very limited information and under considerable uncertainty. The purpose of the class is to familiarize students with normative and descriptive approaches to decision making and to enable them to analyze and understand the challenges of decision making in organizations.

The course will consist of a mixture of lectures, decision making exercises and case studies. During the class we will talk about fundamental decision making concepts and then discuss them in the context of typical management decisions in organizations. We will focus in particular on the challenges for strategic decision making in organizations that are posed by uncertainty and the different approaches how decision makers can deal with them.

Normative Decision Models

Overview decision models, decision trees, expected value maximation, expected utility theory, risk attitudes

Bounded rationality and decision traps

Prospect theory, cognitive biases, biases in probability judgement, decision traps.

Skill, luck and randomness

Endowment effect, status quo bias, black swan events, regression to the mean, business experiments

Predicting the future and judgment aggregation

Introduction to forecasting and scenario analysis, aggregation of information, group negations.

Decisions in groups

Models of group decision-making, group negotiations,  group decision making 

Organizational decision-making

Decision making in organizations, behavioral theory of the firm,  ethics and decision-making

New research directions in decision-making

Developments in decision-making research, reflections on course, preparation take-home project

The readings in this class will comprise textbooks, scientific articles, and handouts. The full reading list will be shared via Canvas before the semester starts. Students are advised to check the syllabus on Canvas before buying any material.

Some suggested text books and research articles for reference: 

Eisenhardt, K. M., & Zbaracki, M. J. (1992). Strategic decision making. Strategic management journal, 13(S2), 17-37.

Eisenhardt, K. M. (1999). Strategy as strategic decision making. MIT Sloan Management Review, 40(3), 65.

Kahneman, D., & Tversky, A. (2013). Prospect theory: An analysis of decision under risk. In Handbook of the fundamentals of financial decision making: Part I (pp. 99-127).

Gavetti, Giovanni, Henrich R. Greve, Daniel A. Levinthal, and William Ocasio. "The behavioral theory of the firm: Assessment and prospects." Academy of Management Annals 6, no. 1 (2012): 1-40.

Russo & Schoemaker (2002). Winning Decisions: Getting it Right the First Time. Doubleday

Kahnenmann (2013) Thinking fast and slow. Penguin.

Shapira, Z. (Ed.). (2002). Organizational decision making. Cambridge University Press.