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UNIT 12: DECISION MAKING THEORIES

UNIT LEARNING OBJECTIVE

Definition and Characteristics of Prospect Theory and Ecological Rationality

REQUIRED READINGS

BRUDERMANN, T., RAUTER, R., & YAMAGATA, Y. (2013). Behavioral aspects of urban resilience. Innovation and Supply Chain Management, 7(3), 83.

Asgary, A., & Levy, J. (2009). A review of the implications of prospect theory for natural hazards and disaster planning. International Journal of Environmental Research, 3(3), 379-394.

VIDEO LECTURE

Defining and differentiating two important theories for decision making under uncertainty

ASSIGNMENT

Based on required readings, answer the following question: Which theory (prospect theory or ecological rationality) is more adequate for decision making under uncertainty?

Grading Rubric:

i) State your main argument: 3 points

ii) Summarize the logical progression of your main argument: 5 points

iii) Argument development (two or three supporting and two or three opposite sub-arguments supported by statements and evidence retrieved from peer-reviewed articles): 15 points

iv) Structure, writing style, and citation: 8 points

NOTE: Rubric built on idea that lowest possible score -- as long as you submit something by the deadline -- is a 69 (=F). So, there are 31 points available to earn above that grade.

SUBMISSION DEADLINES

All deliverables due Saturday at 11:59 pm. In the interest of fairness, late submissions will not be accepted.

RECOMMENDED READINGS

Kunreuther, H., Meyer, R., & Michel-Kerjan, E. (2013). Overcoming decision biases to reduce losses from natural catastrophes. Behavioral foundations of policy, 398-413.

Schrobsdorff, Hecke (2007) Decision Making – and Overview. CNS Seminar. Slides here.

Hansson, Sven O. (1994) Decision Theory: A Brief Introduction. Paper here.

Gigerenzer, G., & Todd, P. M. (1999). Simple heuristics that make us smart. Evolution and Cognition (Paper. 1999)

Phung, Albert (2018) Behavioral Finance: Key Concepts – Prospect Theory. Online article here.

Behavioral Science Concepts. Glossary here.

Theories about Decision Making. Summary here.

Kahneman: Prospect Theory. Video Lecture here.

Gigerenzer: Ecological Rationality. Video Lecture here.