Course 2012-2013 a.y.



Department of Decision Sciences

Course taught in English

Go to class group/s: 31
CLEAM (6 credits - I sem. - OP  |  3 credits SECS-P/01  |  3 credits SECS-S/06) - CLEF (6 credits - I sem. - OP  |  3 credits SECS-P/01  |  3 credits SECS-S/06) - CLEACC (6 credits - I sem. - OP  |  3 credits SECS-P/01  |  3 credits SECS-S/06) - BESS-CLES (6 credits - I sem. - OP  |  3 credits SECS-P/01  |  3 credits SECS-S/06) - BIEMF (6 credits - I sem. - OP  |  3 credits SECS-P/01  |  3 credits SECS-S/06)
Course Director:

Classes: 31 (I sem.)

Course Objectives

Experiments in psychology and economics are used to:

  • Illustrate the conflict between individual objectives and the achievement of collective objectives in firms, markets or citizen committees.
  • Understand how individuals truly make decisions, their limitations and biases, and connect these limitations to organizational decision making.
  • Illustrate how knowledge on human behavior and psychology can be used to design better methods for organizational decision making.

Students are also taught basics of experimental methodology and asked to design experiments to either study the interaction between individual and collective goals or to ameliorate well-known problems in organizational decision making.

Illustrative example: Almost everybody agrees that good public schooling is desirable. If this is the case, why do so many states struggle to have satisfactory public schooling systems? The immediate objectives of parents, students, teachers, and other members of the society lead them to act against the ultimate objective of having well-educated citizens. In the first part of the course we provide a structure to think about such problems. In the second part, two questions are asked: first, is the structure introduced in the first part realistic? Second, how should we realistically expect teachers, parents, and students to behave and interact? Armed with this material, in the third part of the course we address the success stories: why is it that in some states, through cooperation between teachers and parents, through good contract design or via the creation of external support groups, the public schools have shown dramatic improvement in their performance? (A second example can be found in the detailed syllabus at the above-mentioned url).

Course Content Summary

Module 1:
  • Individual rationality with and without risk. Efficiency of organizational decisions. Some paradoxes of decision making.
  • Aggregating tastes, opinions, and information with non-strategic individuals.
  • Strategic behavior: extending rationality. Cooperation problems.

Module 2 (Psychology):

  • Failure of interactive reasoning and its implications for strategic behavior.
  • Iterative reasoning in non-interactive contexts. Individual decisions in the light of iterative reasoning.
  • Memory, attention, and decisions.
  • Heuristics and biases in probability judgment and decision making.
  • Basic notions of experimental methodology (part 1).

Module 3:

  • Experimental methodology (part 2). Experimental economics.
  • Coordination problems and resolution through social norms.
  • Markets and contracts. Making biases disappear or work in favor of efficiency.

Detailed Description of Assessment Methods

One final exam counting for 70% of the final grade. Depending on course size, the remaining 30% comes from a midterm exam or 4 short homework sets.


Reading materials provided at the beginning of the course. Technical material is covered by professor’s typeset notes.

Exam textbooks & Online Articles (check availability at the Library)



Last change 15/05/2012 16:31