SEMINARS IN MANAGEMENT AND ORGANIZATIONS:MANAGERIAL DECISION MAKING
2014/2015, Semester 1
School of Business (Dean's Office (Biz))
Modular Credits: 4
National University of Singapore
NUS Business School
Department of Management and Organization
BMA5409 Seminars in Management & Organization: Managerial Decision Making
Session: Semester 1, AY2014/15
Instructor: Assistant Professor Krishna Savani
Office: Mochtar Riady Building, BIZ 1, #08-49
Off hours: By appointment
TA: Liu Yukun (Luke), firstname.lastname@example.org
Whom to Contact:
For conceptual issues related to course material: Professor
For administrative / logistics / technical issues: TA
Do you perceive yourself as a
rational decision maker
, someone who thinks through important decisions carefully and chooses the outcome that would be best in the long term? If so, you might be in for a big surprise. If you want to learn how your decision making departs from rationality and what you can do to improve your real life decision making, this is the course for you.
This course will be organized around the theme “Decision Making Traps That Many Managers Fall Prey To and What You Can Do To Avoid Them”. It will provide a broad overview of managerial decision-making from both a
managers make decisions?”), as well as, a
managers make decisions to obtain better outcomes?”).
Although most educated people believe that they make decisions rationally, people often use a variety of rules and heuristics that lead to suboptimal decision making in many situations. This course reveals many important decision making slippages that occur in people’s everyday life and discusses its implications for business.
The instructor would demonstrate many decision making slippages in class using exercises, tasks, and surveys, and discuss various business contexts in which such slippages occur. The basic principles learned in class would have applications across a wide range of business decision making contexts, including making financial decisions, investment decisions, managing employees, planning mergers, selling products, and negotiating with others.
An improved understanding of how you and others tend to make decisions, and how you should make decisions, will greatly increase your effectiveness as future managers.
This course will involve primarily interactive teaching methodologies. Students will do numerous exercises in class that will demonstrate the decision making traps that even highly intelligent and educated people fall prey to. Class discussion will center on identifying situations in which such decision making biases occur, how to avoid them, and how to use knowledge of decision making biases for profitable purposes.
Assessments (100% Continuous Assessments):
: 16 points
As this course is primarily learned through in-class demonstrations of decision traps and subsequent discussions, you are expected to attend all sessions. Attendance is absolutely necessary for understanding the concepts covered in the course. Each absence (barring emergencies excused over e-mail before the beginning of class) will lead to a 4 point deduction from the attendance score. If you are absent for more than four classes, the additional attendance point deductions beyond 16 points would be subtracted from the other continuous assessments components.
: 24 points
Students will receive 2 points for making at least one substantial contribution in each class from Week 1 to 12, either in the form of a thoughtful question, a thoughtful response to someone else’s question, or a thoughtful analysis related to the traps being discussed. Please put your name tag in front of your seat in every class session to assist us in assessing class participation.
Weekly introspection paragraphs: 30 points
As an important goal of this course is that students apply the concepts they learn in class to their real life decision making from the very beginning, both in your personal and professional lives. To encourage this, you would be asked to submit a one or two paragraph description (maximum 200 words) of an instance in which you found yourself or someone else falling in or avoiding one of the decision traps
discussed in class in the past week
Examples already mentioned in class, either by the professor or by other students, cannot be reused for the weekly introspection submissions. Decision traps discussed in previous weeks before the most recent class session, or decision traps not yet discussed, are also not allowed.
This paragraph has to be submitted online before the class starting time. Submissions time-stamped after this time will be discarded. No submissions would be due the week after guest lectures, so there will be a total of 10 submissions, each worth 3 points.
Submissions will be graded on the following criteria:
(1) Description: Event described clearly enough so that reader can vividly imagine what happened, including when in the week and where it occurred (1 point)
(2) Analysis: Accurate understanding of the decision trap referred to in the example; event actually reflects the decision making trap that has been claimed to occur (2 points)
An example would be provided in the first class. Qualitative feedback would be provided for submissions in alternate weeks.
Final essay paper
: 30 points
A short final essay paper (5 pages, double-spaced) would ask you to try to challenge the confirmation bias in your everyday interactions with friends and colleagues. Detailed instructions will be handed in Week 8. The paper will be due online on IVLE at 8:00 am on Monday, 24 November.
There or no exams nor any group projects as part of this course.
: Author - Daniel Kahneman, Title -
Thinking, fast and slow.
Required additional readings
: as specified in syllabus and available on IVLE.
Please do the reading for each week
the respective lecture.
: Decision making under risk I
: Prospect Theory, Gain-Loss Asymmetry
: Chapters 25, 26
: Decision making under risk II
: Certainty Effect, Endowment effect, Loss aversion, Sunk Cost
: Chapters 27, 28, 29, 30
: Judgment and prediction I
: Law of small numbers
: Hedge Fund Game
: Chapters 10
: Judgment and prediction II
: Regression to the mean, Anchoring
: Biopharm-Seltek case
: Chapters 11, 17
: Judgment and prediction III
: Similarity, Pricing, Dilution
: Chapters 14, 15, 16, 33, 34
: Choice traps I
: Decoy effect, Compromise effect, Diversification bias
(1) Simonson (1989): Choice based on reasons: The case of attraction and compromise effects
(2) Fox, Ratner, & Lieb (2005): How Subjective Grouping of Options Influences Choice and Allocation: Diversification Bias and the Phenomenon of Partition Dependence
: Choice traps II
: Status Quo bias, Specification bias, Variety seeking, Intertemporal impulsivity
: Chapter 23
(1) Hsee et al. (2009): Specification seeking: How product specifications influence consumer preference.
(2) Simonson (1990): The effect of purchase quantity and timing on variety-seeking behavior
(3) Samuelson & Zeckhauser (1988): Status quo bias in decision making
: Decision making in times of crises
: Mr. Chong Meng, former Executive Vice-President of OCBC Ltd, Managing Director of Deutsche Bank Asia Pacific
Cognitive traps I
: Confirmation bias, Mental accounting
Guess the Sequence
(1) Thaler (1999): Mental accounting matters
(2) Nickerson (1998): Confirmation bias: A ubiquitous phenomenon in many guises
: Cognitive traps II
: Overconfidence effect, Better than average effect, False consensus effect, Considering others’ judgments
: Chapter 24
: Ross and Ward (1995): Naïve realism
: Making difficult decisions
: Mr. Peter Yap, former COO for Auric Pacific Foods Pte Ltd
: Decision evaluation biases
: Hindsight bias, Outcome bias, Peak-end effect
Chapter 19, 35
: Summary and Conclusion