Advanced Topics in Management and Decision-Making

Advanced Topics in Management and Decision-Making

A Mission Statement
Our mission is to develop diverse leaders, propel research-based innovation and promote the
sustainable growth of Inland Southern California within the global economy. We harness the
powerful resources of UC and our location at the nexus of commerce to create a laboratory for
education, research, and productive partnerships across economic enterprises.
The strategic activities that propel our mission include:
• Conducting basic and applied research in management that explores and informs the
creation, development and management of growth;
• Providing degree programs that prepare our students to be effective managers and
responsible community leaders with a deep understanding of the dynamics of growth
in both a regional and global context;
• Partnering with business and community leaders through a shared commitment to
exemplary growth; and
• Delivering educational programs to executives and the public at large that respond to
the needs of our local, state, national, and international communities.
Undergraduate Program – Learning Goals
Problem Solving Skills
Students will be able to use a variety of theoretical perspectives to identify and critically evaluate
implications of business decisions for organizational stakeholders (e.g., customers, colleagues,
employees, stockholders, suppliers, foreign governments, communities, cultures, regulatory
agencies) and the natural environment.
Professional Integrity / Ethical Reasoning Skills
Students will be able to recognize ethical issues, demonstrate familiarity with alternative
frameworks for ethical reasoning, and discern trade-offs and implications of employing different
ethical frames of reference when making business decisions.
Global Context Skills
Students will be conversant with major economic, social, political, and technological trends and
conditions influencing foreign investment and development of the global economy and
demonstrate an understanding of the cultural, interpersonal and analytical competencies required
for engaging in global business activities.
Written Communication Skills
Students will demonstrate proficiency in written communications by creating written document
that are clearly written, with appropriate content and conclusions.
Course description
In contrast to the standard rational model of economic behavior, behavioral economics takes into
account individuals’ limited cognitive abilities and limited willpower. Because of this, people
often make decisions that depart systematically from the predictions derived from the standard
rational model. Behavioral economics attempts to understand these departures by incorporating
psychological findings and insights into economic analysis.
The course focuses on seminal and current research findings and covers topics, such as: Why
economic decisions are driven largely by emotions? How do expectations shape perceptions and
subsequent decisions? What are the negative consequences of monetary incentives on motivation
and task completion?
This highly interdisciplinary course is relevant for students with interests in General
Management, Behavioral Finance, Entrepreneurship, Social Entrepreneurship, and Marketing.
Course/Learning objective
This class has two main learning objectives:
• To introduce the students to the range of cases where people (consumers, employees,
managers, and investors) make decisions that are inconsistent with standard economic theory,
and the assumptions of rational decision making. This is the lens of behavioral economics.
• To help students think creatively about the applications of behavioral economics principles
for the development of new products, technology based products, public policies, and to
understand how business and social policy strategies could be modified with a deeper
understanding of the effects the principles have on consumers, employees, managers, and
investors.
Prerequisite
Upper-division standing or consent of instructor plus curiosity about human nature and a desire
to better understand our choices and decisions and an interest in ways to improve them.
Course materials
There is no class textbook. Instead all required readings are made accessible via the school’s
subscriptions to academic journals and/or on iLearn.
Grading policy
Classes have a lecture component and a combination of exercises (individually as well as in
group settings), discussions, and demonstrations. It is assumed that students complete the
assigned readings before class. To incentivize class readings, there are ten online quizzes: one
quiz for each week of classes.
There are two closed-book midterm exams and one closed-book final exam. There are also two
600-word write-ups on topics, which can be chosen by students from a list of 9. Attendance is
taken in class and (quality) class participation is rewarded.
A. Class participation 5%
B. Weekly online quizzes (total) 10%
C. Midterm exam 1 15%
D. Midterm exam 2 15%
E. Two 600-word write-ups 30%
F. Final exam 25%
Grades will be posted throughout the term on iLearn. If you find any problem with your score, you
must inform the instructor within one week from the time this score is posted. After one week, scores
will not be reviewed.
In the case of score dispute, the entire exam or assignment will be reviewed, not just the question(s)
in dispute. The score could go up, down, or remain the same.
Final grades will be curved based on all grade components (A – F).
A. Class participation:
All students are expected to come to class being prepared for and actively involved in discussing
the assigned readings listed in the schedule part of the syllabus. The class participation credit will
be awarded based on a student’s participation and attendance throughout the whole term,
including the first class.
For class participation credit, attendance is only a necessary but not a sufficient condition. Also,
quality of inputs is much more important than quantity. Particularly useful input furthers the
understanding of your fellow students and as such is targeted towards them rather than towards
the professor. Quality input may also be based on providing real-world examples of concepts
covered in class, relating concepts to one’s own experience, or offering novel applications.
Please note that I will reserve the right to cold-call on students, i.e., to ask students for their input
even if their hands are not raised. Should you not be prepared for a class, please let me know at
the beginning of class, so I will not cold call you. Of course, this will count against you, but not
nearly as much as bluffing your way through my questions.
B. Weekly online quizzes:
There will be online quizzes due every week, including week 1 (before class). The main
motivation for these quizzes is to provide incentives to students to do the class readings on time,
ensuring that we have informative and meaningful discussions during classes.
Each week, quizzes are due Mondays at noon, unless otherwise noted. Submissions after that
deadline will not be graded and will not receive course credit.
C. / D. Midterm exam 1 and 2:
Midterm exams will cover the entire course material up to the time of the exam (i.e., for midterm
exam 1, weeks 1 to 3, and for midterm exam 2, weeks 4 to 6) and consist of a number of short
essay questions and multiple-choice questions.
E. Two 600-word write-ups:
There is a write-up topic available every week, except week 1, so in total there are nine topics, of
which you need to choose two. The write-ups are an integral part of the course and should lead to
a more informed and lively discussion of the material in class.
Some guidelines:
1. You must submit at least one write-up by 02/06 (noon), and the second write-up by 03/13
(noon). You may, of course, finish the write-ups sooner.
2. You can find the essay topics in the section “Readings and Assignments” (pages 6-12) in
the bottom section of each week’s description. The write-up topics are labeled “Write-Up
1,” “Write-Up 2,” etc. You can choose any of the 9 topics for your submissions, but
please note that you can’t write on the same topic twice, i.e., the two essays have to be on
two different topics.
3. Write-ups have a strict word limit of 600 words. You will be penalized for exceeding the
word limit. However, please note that very short submissions (typically around 450
words and less) tend to do poorly as well.
4. Please include the word count at the top of the document (e.g., “Word Count: 576”).
5. Please omit the standard introduction and conclusion paragraphs. Instead jump right into
the topic. Also, assume that you talk to someone who has done the readings, so no need
to define concepts and/or refer to academic literature.
6. Please upload the essays as Word files via iLearn (no PDFs). Do NOT enter any
assignment notes. Please use double spacing and 12-point fonts with margins of 1 inch all
around. Name the file with your full name and topic number (e.g., John Doe 2.docx).
Essay Grading:
I will grade essays out of 15 points, where 15 is “exceptional” (will be given VERY rarely),
14 is “nearly perfect” and 1 is “unacceptable” (you didn’t answer the question). Most grades
will range from 9 to 12, with 11-12 implying that the essay was very good.
F. Final exam:
The final exam is cumulative and will cover all lecture materials from weeks 1 to 10. Overall, it
will account for 25% of your grade. It will take place on Thursday, March 21, from 3:00pm to
4:00pm in Olmsted Hall 1212.
Miscellaneous
Computers and cell phones: I allow the use of laptops and tablets in class to allow students to
take notes during lectures. However, the use of these devices must be limited to class activities
during lectures (no emails, facebook, texting, etc.). This also implies that the use of smartphones
is not allowed during class.
Timeliness: Please arrive on time. As an extra inventive, I will take attendance at the beginning
of class, and attendance will be one factor of class participation. We will start promptly and, in
return, I promise to let you out early if that section of class allows.
Scoring: Scores will be posted throughout the quarter on iLearn. If you dispute a score, you must
inform me within one week from the time the score is posted. After one week, scores will not be
reviewed. In case of a score dispute, I will re-assess the entire assignment/exam, not only the
question(s) in dispute. As a result, your score may go up, down, or remain the same.
Course schedule
Details are subject to change. We may fall behind schedule, but we will catch up.
Week Topic Assignments
1: 1/07 & 1/09 Introduction to Behavioral Economics Quiz 1 (due 1/09, noon)
2: 1/14 & 1/16 Incentives & Motivation Quiz 2
3: 1/21 & 1/23 No Class / Midterm Exam 1 Quiz 3
4: 1/28 & 1/30 Competition & Markets Quiz 4
5: 2/04 & 2/06 Dishonesty & Cheating Quiz 5 (one essay due 02/06, noon)
6: 2/11 & 2/13 Grey Marketing & Revenge / Midterm Exam 2 Quiz 6
7: 2/18 & 2/20 No Class/ Decision Making in Groups Quiz 7
8: 2/25 & 2/27 Other-Regarding Preferences Quiz 8
9: 3/04 & 3/06 Psychology of Money Quiz 9
10: 3/11 & 3/13 Emotions & Happiness / Recap & Q&A Quiz 10 (second essay due 03/13, noon)
Readings and assignments
Week 1
01/07 & 1/09
Introduction to Behavioral Economics
Topics Theory: Standard rational model of economic decisions, bounded rationality
Application: How do we value things?
Readings Bouchand, J.-P. (2008). Economics needs a scientific revolution. Nature,
455, 1181.
Conlisk, J. (1996). Why bounded rationality? Journal of Economic
Literature, 34, 669-700.
Huber, J., Payne, J. W., & Puto, C. P. (2014). Let’s be honest about the
attraction effect. Journal of Marketing Research, 50, 520-525.
Johnson, E. J., & Goldstein, D. (2003). Do defaults save lives? Science, 302,
1338-1339.
Kahneman, D. (2003). Maps of bounded rationality: Psychology for
behavioral economics. American Economic Review, 93, 1449-1475.
Tversky, A., & Kahneman, D. (1986). Rational choice and the framing of
decisions. Journal of Business, 59, S251-S278.
Thaler, R., & Sunstein, C. (2003). Libertarian paternalism. American
Economic Review, 93, 175-179.
Quiz 1 Due: Wednesday 1/09 at noon
Week 2
1/14 & 1/16
Incentives & Motivation
Topics Theory: Learning, crowding out of motivation, and the W-effect
Application: How do we motivate people to exercise and to comply with
treatments?
Readings Ariely, D., Bracha, A., & Meier, S. (2009). Doing good or doing well? Image
motivation and monetary incentives in behaving prosocially. American
Economic Review, 99, 544-555.
Charness, G., & Gneezy, U. (2009). Incentives to exercise. Econometrica, 77,
909-931.
Gneezy, U., Meier, S., & Rey-Biel, P. (2011). When and why incentives
(don’t) work to modify behavior. Journal of Economic Perspectives,
25, 191-210.
Gneezy, U., & Rustichini, A. (2000). A fine is a price. Journal of Legal
Studies, 39, 1-18.
Gneezy, U., & Rustichini, A. (2000). Pay enough or don’t pay at all.
Quarterly Journal of Economics, August, 791-810.
Norton, M. I., Mochon, D., & Ariely (2012). The IKEA effect: When labor
leads to love. Journal of Consumer Psychology, 22, 453-460.
Quiz 2 Due: Monday 1/14 at noon
Write-Up 1 One of the lessons of this section is that incentives matter. Find an example
of bad incentives in the real world and suggest ways to fix the problem.
Explain why you think your approach is better.
Week 3
1/21 & 1/23
No Class (1/21) / Midterm Exam 1 (1/23)
Topics Theory: Social norms, social and work related exchanges, and backward
sloping demand curves
Application: How do we get people to engage?
Readings Aggarwal, P. (2004). The effects of brand relationship norms on consumer
attitudes and behavior. Journal of Consumer Research, 31, 87-101.
Fehr, E., & Fischbacher, U. (2004). Third party punishment and social norms.
Evolution and Human Behavior, 25, 63-87.
Goodnow, J. J. (1998). Beyond the overall balance: The significant of
particular tasks and procedures for perceptions of fairness in
distributions of household work. Social Justice Research, 11, 359-376.
Heyman, J., & Ariely, D. (2004). A tale of two markets. Psychological
Science, 15, 787-793.
Maciejovsky, B., Budescu, D. V., & Ariely, D. (2009). The researcher as a
consumer of scientific publications: How do name-ordering
conventions affect inferences about contribution credit? Marketing
Science, 28, 589-598.
McGraw, A. P., Tetlock, P. E., & Kristel, O. V. (2003). The limits of
fungibility: Relational schemata and the value of things. Journal of
Consumer Research, 30, 219-229.
McGraw, A. P., & Tetlock, P. E. (2005). Taboo trade-offs, relational framing,
and the acceptability of exchanges. Journal of Consumer Psychology,
15, 2-15.
Quiz 3 Due: Monday 1/21 at noon
Write-Up 2 One of the lessons of this section is that communal sharing and market
pricing often are at conflict. Find an example from the realm of consumer
experiences where the perceptions of consumers are at odds with (some of)
the practices of the companies involved (e.g., consumers perceive their bank
as a communal institution, however, the bank introduced steep fees for late
payments). Discuss how the company at hand can mitigate the tension that
you have identified between consumers’ perceptions and the business
practices involved. Do not use the bank example, but come up with your own
example.
Week 4
1/28 & 1/30
Competition & Markets
Topics Theory: Competition and informational efficiency
Application: Do market prices reflect the biases of their traders?
Readings Balafoutas, L., & Sutter, M. (2012). Affirmative action policies promote
women and do not harm efficiency in the lab. Science, 335, 579-582.
Budescu, D. V., & Maciejovsky, B. (2005). The effect of payoff feedback
and information pooling on reasoning errors: Evidence from
experimental markets. Management Science, 51, 1829-1843.
Gneezy, U., Leonard, K. L., & List, J. A. (2009). Gender differences in
competition: Evidence from a matrilineal and a patriarchal society.
Econometrica, 77, 1637-1664.
Gneezy, U., Niederle, M., & Rustichini, A. (2003). Performance in
competitive environments: Gender differences. Quarterly Journal of
Economics, August, 1049-1074.
Gneezy, U., & Rustichini, A. (2004). Gender and competition at a young age.
American Economic Review – Papers and Proceedings, May, 377-381.
Kirchler, E., & Maciejovsky, B. (2002). Simultaneous over- and
underconfidence: Evidence from experimental asset markets. Journal of
Risk and Uncertainty, 25, 65-85.
Maciejovsky, B., & Budescu, D. V. (2013). Markets as a structural solution
to knowledge-sharing dilemmas. Organizational Behavior and Human
Decision Processes, 120, 154-167.
Quiz 4 Due: Monday 1/28 at noon
Write-Up 3 One of the lessons of this section is that gender differences might be
pervasive in competitive settings. Discuss ways how you could mitigate the
negative effect of competition on the career progression of women in
corporate settings.
Week 5
2/04 & 2/06
Dishonesty & Cheating
Topics Theory: Consumer dishonesty, tax evasion, cheating, interventions, and
medium effects
Application: Why do people cheat and what are the implications?
Readings Bazerman, M. H., Loewenstein, G., & Moore, D. A. (2002). Why good
accountants do bad audits. Harvard Business Review, November, 96-
103.
Cummings, R., Martinez-Vazquez, J., McKee, M., & Torgler, B. (2009). Tax
morale affects tax compliance: Evidence from surveys and an
artefactual field experiment. Journal of Economic Behavior and
Organization, 70, 447-457.
Epley, N., Mak, D., & Idson, L. C. (2006). Bonus or rebate?: The
impact of income framing on spending and saving. Journal of
Behavioral Decision Making, 19, 213-227.
Hsee, C. K., Yu, F., Zhang, J., & Zhang, Y. (2003). Medium Maximization.
Journal of Consumer Research, 30, 1-14.
Maciejovsky, B., Kirchler, E., & Schwarzenberger, H. (2007). Misperception
of chance and loss repair: On the dynamics of tax compliance. Journal
of Economic Psychology, 28, 678-691.
Mazar, N., On, M., & Ariely, D. (2008). The dishonesty of honest people: A
theory of self-concept maintenance. Journal of Marketing Research,
45, 633-644.
Shu, L., Mazar, N., Gino, F., Ariely, D., & Bazerman, M. H. Signing at the
beginning makes ethics salient and decreases dishonest self-reports in
comparison to signing at the end. Proceedings of the National Academy
of Sciences, 109, 15197-15200.
Quiz 5 Due: Monday 2/04 at noon
Write-Up 4 Due: At least 1 essay is due by 2/06 at noon (choose any of the 9 topics)
One of the lessons of this section is that people tend to cheat a bit – but not
too much – if they can. One of the big puzzles, however, is that people tend
to pay their taxes at much higher rates than would have been warranted by
the deterrence approach of standard economics that takes into account
objective audit rates and penalties. Discuss what factors might be responsible
for people’s relatively high tax compliance and discuss ways of how the IRS
could further increase compliance.
Week 6
2/11 & 2/13
Grey Marketing & Revenge (2/11) / Midterm Exam 2 (2/13)
Topics Theory: Corporate dishonesty, free money, gray marketing, long-term effects
of dishonesty, and consumer revenge
Application: What are the outcomes for long-term deceptive practices by
companies?
Readings Dana, J., & Loewenstein, G. (2003). A social scientist perspective on gifts to
physicians from industry. Journal of the American Medical
Association, 290, 252-255.
Knutson, B. (2004). Sweet revenge? Science, 305, 1246-1247.
Kruger, A. B., & Mas, A. (2004). Strikes, scabs, and tread separations: Labor
strife and the production of defective Bridgestone/Firestone tires.
Journal of Political Economy, 112, 253-289.
McGovern, G., & Moon, Y. (2007). Companies and the customers who hate
them. Harvard Business Review, 85, 78-84.
Shampanier, K., Mazar, N., & Ariely, D. (2007). Zero as a special price: The
true value of free products. Marketing Science, 26, 742-757.
Quiz 6 Due: Monday 2/11 at noon
Write-Up 5 One of the lessons of this section is that customer dissatisfaction has severe
market implications. The tendency that negative experiences are shared at a
higher rate than positive experiences on social media is called “negativity
bias.” Discuss ways of how consumers can be motivated to share their
experiences in a more balanced fashion, such that not only negative but also
positive experiences are posted.
Week 7
2/18 & 2/20
No Class (2/18) / Making Decisions in Groups (2/20)
Topics Theory: Benefits and disadvantages of making decisions in groups,
conformity, authority, and following the emerging group norms
Application: What are some technological tools that could help us make
groups behave better?
Readings Bonner, B. L., & Baumann, M. R. (2012). Leveraging member expertise to
improve knowledge transfer and demonstrability in groups. Journal of
Personality and Social Psychology, 102, 337-350.
Charness, G., & Sutter, M. (2012). Groups make better self-interested
decisions. Journal of Economic Perspectives, 26, 157-176.
Laughlin, P. R. (2011). Group Problem Solving. Princeton: Princeton
University Press, Chapter 1 and Chapter 5.
Lightle, J. P., Kagel, J. H., & Arkes, H. (2009). Information exchange in
group decision making: The hidden profile problem reconsidered.
Management Science, 55, 568-581.
Maciejovsky, B., & Budescu, D. V. (2007). Collective induction without
cooperation? Learning and knowledge transfer in cooperative groups
and competitive auctions. Journal of Personality and Social
Psychology, 92, 854-870.
Stasser, G., & Titus, W. (1985). Pooling of unshared information in group
decision making: Biased information sampling during discussion.
Journal of Personality and Social Psychology, 53, 81-93.
Tindale, R. S., Kameda, T., & Hinsz, V. B. (2003). Group decision making.
In: M. A. Hogg and J. Cooper (eds.), Sage Handbook of Social
Psychology. London: Sage, pp. 381-403.
Quiz 7 Due: Monday 2/18 at noon
Write-Up 6 One of the lessons of this section is that groups outperform an equal number
of individuals for intellective tasks (those with a demonstrably correct
solution). For judgmental tasks (those without a demonstrably correct
solution), groups do not outperform individuals. Discuss why we observe
these differential effects. What are possible ways of improving the decisions
of groups for judgmental problems?
Week 8
2/25 & 2/27
Other Regarding Preferences
Topics Theory: Cooperation, fairness, and trust
Application: How can we measure social capital?
Readings Bardsley, N. (2008). Dictator game giving: Altruism or artefact?
Experimental Economics, 11, 122-133.
Camerer, C. (2003). Dictator, ultimatum, and trust games. Behavioral
Game Theory: Experiments in Strategic Interaction. Princeton:
Princeton University Press, Chapter 2: pp. 43-113.
Dana, J., Cain, D. M., & Dawes, R. (2006). What you don’t know won’t hurt
me: Costly (but quiet) exit in a dictator game. Organizational Behavior
and Human Decision Processes, 100, 193-201.
Fehr, E. & Gaechter, S. (2000).Fairness and retaliation: The economics of
reciprocity. Journal of Economic Perspectives, 14, 159-181.
Fehr, E. (2002). Why social preferences matter: The impact of non-selfish
motives on competition, cooperation and incentives. Economic
Journal, 112, C1-C33.
Kahneman, D., Knetsch, J. L., & Thaler, R. (1986). Fairness as a constraint
on profit seeking: Entitlements in the market. American Economic
Review, 76, 728-741.
Lee, L., Frederick, S., & Ariely (2006). Try it, you’ll like it: The influence of
expectation, consumption, and revelation on preferences for beer.
Psychological Science, 12, 1054-1058.
Quiz 8 Due: Monday 2/25 at noon
Write-Up 7 One of the lessons of this section is that people care not only about their own
outcomes but also about the outcomes of others. Discuss whether you think
that the importance of fairness is incompatible with the idea of price
discrimination (for example, to charge lower ticket prices to students for
events). How can companies use fairness to advertise/sell their products and
services and maintain/increase customer loyalty?
Week 9
3/04 & 3/06
Psychology of Money
Topics Theory: Fairness, opportunity cost, and the psychology of free
Application: How do people think about payment?
Readings Benartzi, S., & Thaler, R. H. (2007). Heuristics and biases in retirement
savings behavior. Journal of Economic Perspectives, 21, 81-104.
Benartzi, S., & Thaler, R. H. (2004). Save more tomorrow: Using behavioral
economics to increase employee savings. Journal of Political Economy,
112, S164-S187.
Frederick, S., Novemsky, N., Wang, J., Dhar, R., & Nowlis, S. (2009).
Opportunity cost neglect. Journal of Consumer Research, 36, 553-561.
Kahneman, D., Knetsch, J. L., & Thaler, R. H. (1986). Fairness as a
constraint on profit seeking: Entitlements in the market. American
Economic Review, 76, 728-741.
Simonsohn, U., & Loewenstein, G. (2006). Mistake #37: The impact of
previously faced prices on housing demand. Economic Journal, 116,
175-199.
Vohs, K. D., Mead, N. L., & Goode, M. R. (2006). The psychological
consequences of money. Science, 314, 1154-1156.
Quiz 9 Due: Monday 3/04 at noon
Write-Up 8 One of the lessons of this section is that fairness matters. Find an example of
how it matters in the real world (e.g., on a virtual marketplace) and design a
mechanism (e.g., a feedback system) that ensures the persistence of fairness
in that setting. Please come up with your own example.
Week 10
3/11 & 3/13
Emotions & Happiness / Recap and Q&A
Topics Theory: Happiness, well-being, and hedonic adaptation
Application: How can we increase our well-being?
Readings Baumeister, R. F., Bratslavsky, E., Finkenauer, C., & Vohs, K. D. (2001).
Bad is stronger than good. Review of General Psychology, 5, 323-370.
Crum, A. J., & Langer, E. J. (2007). Mind-set matters: Exercise and the
placebo effect. Psychological Science, 18, 165-171.
Gigerenzer, G. (2004). Dread risk, September 11, and fatal traffic accidents.
Psychological Science, 15, 286-287.
Layard, R. (2006). Happiness and public policy: A challenge to the
profession. Economic Journal, 116, C24-C33.
Kenney, R. L. (2008). Personal decisions are the leading cause of death.
Operations Research, 56, 1335-1347.
Rosenbaum, J. E. (2009). Patient teenagers? A comparison of the sexual
behavior of virginity pledgers and matched nonpledgers. Pediatrics,
123, e109-e120.
Wilkinson, W. (2007). In Pursuit of Happiness Research: Is It Reliable? What
Does It Imply for Policy? Cato Institute: Policy Analysis, No. 590.
Quiz 10 Due: Monday 3/11 at noon
Write-Up 9 Due: The second essay (choose any topic not chosen for first essay) is due by
03/13 at noon
One of the lessons of this section is that self-reported happiness varies widely
across countries, often even between comparable countries. Discuss how selfreported
happiness changes across time for individuals. What are the major
drivers of happiness and how can advertisers use perceptions of happiness to
sell products/services?