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:

• Demonstrate comprehensive understanding of the research methods and results of research on human judgement and decision making
• Demonstrate comprehensive understanding of the field of judgement and decision making and its relevance to finance
• Critically reflect on the scope and limits of human rationality
• Demonstrate logic and justification within skills of argument construction

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,
Fischhoff, B. & Broomell, S. B. (2020). Judgment and Decision Making. Annual Review of Psychology, 71:1, 331-355
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 Overconfidencewhile 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

Research element

Demonstrate comprehensive understanding of the research methods and results of research on human judgement and decision making

Interdisciplinary

This module draws on research primarily from cognitive psychology and behavioural economics.

Subject specific skills

Evaluate experimental research and data, assessing the external validity of lab results
Apply a range of theoretical perspectives on human decision making
Identify key judgement and decision making biases

Transferable skills

Demonstrate confidence in discussing both orally and in writing theoretical and empirical issues of practical relevance (integrating theory and practice)