A00012 Behavioural economics of management and organizations

The learning objectives of the course is to introduce the student to the main behavioral biases that characterize decision making processes, understanding how these impact on management and organizational behavior. The goal is to teach the student how to recognize and deal with these biases in order provide valuable tools to address inefficient behavior within organizatons

The expected results of the course are to turn students into better decision makers, by teaching them to recognize and correct possible biases in their own behavior in order to enhance their future prospects.

The course provides an introduction to the behavioral approach to decision making processes within organizations. Behavioral economics has introduced psychological complexity into the standard economic framework of individual decision making, with the aim of explaining the puzzles observed in various decision-making contexts. Organizational behavior and industrial organization represent some of the most recent fields of application of behavioral economics.

The course will include three main parts. The first part introduces a series of well documented biases that are relevant to comprehend choices of firms and consumers, as well as introducing a theory that can account for many deviations from rationality (prospect theory). In the second part we will concentrate on analyzing the impact of these biases on organizational behavior, suggesting possible policies (nudges) that organizations may adopt to attenuate their effect and improve efficiency. In the final part we present relevant applications such as the role of social identity and the behavioral economics of sports.

Topics Covered

Why is Behavioral Economics relevant for organizational behavior?

The Building Blocks of Behavioral Economics

• Prospect Theory: Choice Under Risk and Uncertainty
• Some Relevant Biases: Cognitive Dissonance, Confirmation Bias, and Motivated Reasoning 

The Behavioral Economics of Organizations

• Basic Issues in a simple Principal-Agent framework
• Group collaboration within organizations: loyalty, peer effects, coordination, culture
• Top management deviations from rationality and their effect
• How organizations can identify and exploit biases: nudging

Topics and Applications

• Social identity and how it can affect firm efficiency
• Behavioral economics and sports 
• Salient thinking and how it can be exploited by profit maximizing firms

This course will involve lectures, case studies, as well as class presentations.

The grade for the course will be based on a group evaluation, where each group (maximum 4 students) will be required to prepare a class presentation and an essay (1500-2000 words) on a topic of choice.