Introductory description

This module outlines the key principles and phenomena underlying human judgement and decision making.

Module web page

Module aims

Outline syllabus

This is an indicative module outline only to give an indication of the sort of topics that may be covered. Actual sessions held may differ.

[1] The nature of rationality.
[2] Theoretical perspective on human judgement.
[3] The psychology of value and utility.
[4] Decision making under certainty.
[5] Decision making under risk.
[6] Decisions and time: Should we discount the future?
[7] Judgement.
[8] Confidence and expertise.
[9] Decision making in markets, groups and society.

Learning outcomes

By the end of the module, students should be able to:

• Understand the research methods and results of research on human judgement and decision making and should be able to - critically evaluate experimental research
• Understand the research methods and results of research on human judgement and decision making and should be able to - understand and apply a range of theoretical perspectives on human decision making
• Understand the research methods and results of research on human judgement and decision making and should be able to - identify key judgement and decision making biases

Indicative reading list

Daniel Kahneman (2012), Thinking: Fast and Slow, Penguin.
Hastie and Dawes (2010, 2nd edition), Rational Choice in an Uncertain World, Sage Publications.
Ariely, D., Loewenstein, G., & Prelec, D. (2003). "Coherent arbitrariness": Stable demand curves without stable preferences. The Quarterly Journal of Economics.
Frederick, S., Loewenstein, G., & O'Donoghue, T. (2002). Time discounting and time preference: A critical review. Journal of Economic Literature.
Gerd Gigerenzer, Gut Feelings: Short Cuts to Better Decision Making.
Gigerenzer, G., & Gaissmaier, W. (2011). Heuristic Decision Making. Annual Review of Psychology.
Hertwig, R., Barron, G., Weber, E. U., & Erev, I. (2004). Decision from experience and the effect of rare events in Risky Choices. Psychological Science.
Hsee, C. K. (1996). The evaluability hypothesis: An explanation for preference reversals between joint and separate evaluations of alternatives. Organizational Behavior and Human Decision Processes.
Houston, A. I. (1997). Natural Selection and Context-Dependent Values. Proceedings: Biological Sciences.
Houston, A. I., McNamara, J. M., & Steer, M. D. (2007). Do We Expect Natural Selection to Produce Rational Behaviour? Philosophical Transactions: Biological Sciences.
Huber, J., Payne, J. W., & Puto, C. (1982). Adding asymmetrically dominated alternatives: Violations of regularity and the similarity hypothesis. Journal of Consumer Research.
Rieskamp, J., Busemeyer, J. R., & Mellers, B. A. (2006). Extending the bounds of rationality: Evidence and theories of preferential choice. Journal of Economic Literature.
Roe, R., Busemeyer, J. R., & Townsend, J. T. (2001). Multialternative Decision Field theory. Psychological Review.
Shafir, E., Simonson, I., & Tversky, A. (1993). Reason-based choice. Cognition.
Simonson, I., & Tversky, A. (1992). Choice in Context: Tradeoff Contrast and Extremeness Aversion. Journal of Marketing Research.
Simonson, Itamar (1993), "Get Closer to Your Customers by Understanding How They Make Choices," California Management Review.
Slovic, P., & Lichtenstein, S. (1983). Preference reversal: A broader perspective. American Economic Review.
Tversky, A. (1969). Intransitivity of preferences. Psychological Review.
Tversky, A., & Kahneman, D. (1986). Rational choice and the framing of decisions. Journal of Business.
Tversky, A., & Kahneman, D. (1974). Judgment under uncertainty: Heuristics and biases. Science.
Tversky, A. (1972). Elimination by aspects: A theory of choice. Psychological Review.
Alex Van Zant and Don Moore (2013). Avoiding the Pitfalls of Overconfidence while Benefiting from the Advantages of Confidence, California Management Review, Winter.
Liu, C., Vlaev, I, Fang, C., Denrell, J., & Chater, N (2017). "Strategizing with biases: Engineering choice contexts for better decisions using Mindspace approach." California Management Review.

Subject specific skills

Critical evaluation of experimental data; assessing the external validity of lab results.
Critical reflection on the scope and limits of human rationality.

Transferable skills

Demonstrate logic and justification within skills of argument construction.
Understand, and be able to present orally and in writing their understanding of the field of judgement and decision making and its relevance to finance.
Demonstrate confidence in discussing both orally and in writing theoretical and empirical issues of practical relevance (integrating theory and practice).
Demonstrate business relevant presentation skills