Human behavior and decision-making

Human behavior and decision-making is a featured research topic at Harvard Business School.
Ever since their origins about three decades ago, the Behavioral Science areas of economics, ethics and managerial psychology have been rapidly evolving. In the 1980's and 1990's, early work by Max Bazerman in judgment and negotiation, Matthew Rabin in behavioral economics, and James Sebenius in negotiations was instrumental in shaping research on Human Behavior & Decision-Making. Today, our research focuses on individual and interactive judgment and decision making and explores the role of personal bias, cognition and learning, time, perception, ethics and morality, and emotion.  
  1. Seaside Organics

    Howard H. Stevenson and Alisa Zalosh

    This case follows Sara Norton, a soccer player-turned-serial entrepreneur, as she transforms Seaside Organics from a fledgling startup into an $89 million company. Informed by the successes and failures of her first organics venture, WellBar, Norton tries to balance her naturally energetic, hands-on approach with the changing needs of a large company. Students discuss the differences between running a growing startup versus a mature organization, and the tensions that can result between entrepreneurs and the managers tasked with running their organizations.


    Stevenson, Howard H., and Alisa Zalosh. "Seaside Organics." Harvard Business School Brief Case 916-526, May 2016. View Details
  2. The Power of C.E.O. Activism: How Politically Outspoken Executives Sway Public (and Consumer) Opinion

    Aaron K. Chatterji and Michael W. Toffel

    Some CEOs are making news by taking public stances on controversial social issues largely unrelated to their core business. This article summarizes the insights from our research paper that shows that such "CEO activism" can influence public opinion and consumer attitudes.

    Keywords: leadership; Leadership &Corporate Accountability; Non-market Strategy; corporate social responsibility; politics; political influence; political strategy; political risk; equity; gender; climate change; Communication Strategy; Law; Leadership; Brands and Branding; Media; Problems and Challenges; Civil Society or Community; Social Issues; Public Opinion; United States; Georgia (state, US); North Carolina; Indiana; Indianapolis;


    Chatterji, Aaron K., and Michael W. Toffel. "The Power of C.E.O. Activism: How Politically Outspoken Executives Sway Public (and Consumer) Opinion." Grey Matter. New York Times (April 3, 2016), SR10. View Details
  3. An Interview with Raffaella Sadun: "Information" vs. "Communication:" The Battle to Influence Decision Making

    Raffaella Sadun and Frieda Klotz

    I explain how two traditionally connected technologies may appear to pull organizations in opposing directions.


    Sadun, Raffaella, and Frieda Klotz. An Interview with Raffaella Sadun: "Information" vs. "Communication:" The Battle to Influence Decision Making. Art. 57407. MIT Sloan Management Review (website) (April 5, 2016). View Details

    John R. Wells and Gabriel Ellsworth

    Launched in 2000, ASOS was one of the world's largest online fashion specialists in 2016. Focusing on young consumers aged 16–25 years, the company offered over 80,000 items on its websites, many times more than the largest fashion stores, and added several thousand new lines every week. Based in the United Kingdom, ASOS shipped products to 240 countries and territories, and international sales represented more than 50% of total revenues. But when new CEO Nick Beighton took over from founder Nick Robertson in September 2015, he faced some significant challenges. While ASOS was large by online standards, traditional fashion retailers were building their own online sales capabilities, and Amazon was expanding its apparel offering. Meanwhile, new online competitors were emerging at a rapid rate. After ASOS issued several profit warnings in 2014, its growth had slowed to 18% in 2015. Beighton was convinced that ASOS's strategy was right and that the company needed to improve its execution to recapture its historical success. Some analysts were not so sure, and the stock price still had not recovered from its 2014 fall. ASOS' goal was to be "the world's no.1 fashion destination for 20-somethings." Did this lofty ambition make sense? And did ASOS have the right strategy to achieve it?

    Keywords: ASOS; AsSeenOnScreen; online fashion; online apparel; Nick Beighton; Nick Robertson; e-commerce; E-Commerce strategy; online retail; multichannel retailing; omnichannel; social media; marketplaces; shipping; Advertising; Online Advertising; Business Growth and Maturation; Business Model; Business Startups; For-Profit Firms; Customer Focus and Relationships; Age; Gender; Currency Exchange Rate; Profit; Revenue; Geography; Geographic Scope; Global Range; Global Strategy; Globalized Firms and Management; Globalized Markets and Industries; Business History; Selection and Staffing; Journals and Magazines; Human Capital; Business or Company Management; Crisis Management; Goals and Objectives; Growth and Development; Growth and Development Strategy; Growth Management; Management Succession; Brands and Branding; Marketing Channels; Marketing Communications; Marketing Strategy; Product Positioning; Social Marketing; Media; Distribution; Distribution Channels; Order Taking and Fulfillment; Infrastructure; Logistics; Public Ownership; Problems and Challenges; Strategy; Adaptation; Business Strategy; Competition; Competitive Strategy; Corporate Strategy; Expansion; Vertical Integration; Segmentation; Internet; Mobile Technology; Online Technology; Search Technology; Web; Web Sites; Apparel and Accessories Industry; Fashion Industry; Retail Industry; United Kingdom; England; London;


    Wells, John R., and Gabriel Ellsworth. "ASOS PLC." Harvard Business School Case 716-449, March 2016. View Details
  5. Knowing When to Ask: The Cost of Leaning-in

    Christine L. Exley, Muriel Niederle and Lise Vesterlund

    Gender differences in the propensity to negotiate are often used to explain the gender wage gap, popularizing the push for women to "lean-in." We use a laboratory experiment to examine the effect of leaning-in. Despite men and women achieving similar and positive returns when they are forced to negotiate, we find that women avoid negotiations more often than men. While this suggests that women would benefit from leaning-in, a direct test proves otherwise. Women appear to positively select into negotiations and to know when to ask. By contrast, we find no significant evidence of such a positive selection for men.

    Keywords: gender; negotiations; leaning-in; Negotiation Participants; Negotiation Style; Gender;


    Exley, Christine L., Muriel Niederle, and Lise Vesterlund. "Knowing When to Ask: The Cost of Leaning-in." Harvard Business School Working Paper, No. 16-115, March 2016. View Details
  6. Creativity Under Fire: The Effects of Competition on Creative Production

    Daniel P. Gross

    Though fundamental to innovation and essential to many industries and occupations, the creative act has received limited attention as an economic behavior and has historically proven difficult to study. This paper studies the incentive effects of competition on individuals' creative production. Using a sample of commercial logo design competitions, and a novel, content-based measure of originality, I find that competition has an inverted-U effect on creativity: some competition is necessary to induce agents to produce radically novel, untested ideas over incrementally tweaking their earlier work, but heavy competition drives them to stop investing altogether. The results are consistent with economic theory and reconcile conflicting evidence from an extensive literature on the effects of competition on innovation, with implications for R&D policy, competition policy, and organizations in creative or research industries.

    Keywords: creativity; incentives; tournaments; competition; radical vs. incremental innovation; Motivation and Incentives; Competition; Creativity; Innovation and Invention;


    Gross, Daniel P. "Creativity Under Fire: The Effects of Competition on Creative Production." Harvard Business School Working Paper, No. 16-109, March 2016. View Details
  7. Preparing the Self for Team Entry: How Relational Affirmation Improves Team Performance

    Julia J. Lee, Francesca Gino, Daniel M. Cable and Bradley R. Staats

    Working in teams often leads to productivity loss because the need to feel accepted prevents individual members from making a unique contribution to the team in terms of the information or perspective they can offer. Drawing on self-affirmation theory, we propose that pre-team relational self-affirmation can prepare individuals to contribute to team creative performance more effectively. We theorize that relationally affirming one's self-views increases general feelings of being socially valued by others, leading to better information exchange and creative performance. In a first study, we found that teams in which members affirmed their best selves prior to team formation (i.e., by soliciting and receiving narratives that highlight one's positive impact on close others) outperformed teams that did not do so on a creative problem-solving task. In the second experiment, conducted using virtual teams, we show that pre-team relational self-affirmation leads to heightened feelings of social worth, which in turn explains the effect of the treatment on the team's ability to exchange information.

    Keywords: relational self-affirmation; team entry; team creative performance; information exchange; social worth; Creativity; Groups and Teams; Attitudes; Performance;


    Lee, Julia J., Francesca Gino, Daniel M. Cable, and Bradley R. Staats. "Preparing the Self for Team Entry: How Relational Affirmation Improves Team Performance." Harvard Business School Working Paper, No. 16-111, March 2016. View Details
  8. Michael Milken: The Junk Bond King

    Tom Nicholas and Matthew G. Preble

    Michael Milken, an investment banker who dominated the junk bond market in the 1980s, was sentenced to jail in 1990 after pleading guilty to a number of securities and tax related felonies. In the preceding decade, Milken had helped usher in a new wave of leveraged buy outs (LBOs) and greatly changed the structure of corporate America. By the late 1980s though, Milken and junk bonds became more heavily scrutinized, and Milken was eventually implicated in a number of felonious acts. Even after his admission of guilt, however, observers remained divided on what Milken's true impact had been. Was he simply a misunderstood financial innovator who democratized access to capital? Or was he driven purely by greed and by nefarious personal financial motives?

    Keywords: junk bonds; high-yield bonds; financial innovation; shareholder value; Bonds; Capital; Capital Structure; Cost of Capital; Crime and Corruption; Entrepreneurship; Ethics; Finance; Investment Banking; Leveraged Buyouts; Mergers and Acquisitions; Ownership; Private Equity; Restructuring; United States;


    Nicholas, Tom, and Matthew G. Preble. "Michael Milken: The Junk Bond King." Harvard Business School Case 816-050, March 2016. View Details
  9. Popular Acceptance of Morally Arbitrary Luck and Widespread Support for Classical Benefit-Based Taxation

    Matthew C. Weinzierl

    Public moral reasoning is shown to differ in three specific ways from what is conventionally assumed in modern optimal tax theory. Large majorities of survey respondents resist costless redistribution of arbitrarily determined unequal outcomes and prefer justifying tax progressivity based on benefit received rather than on diminishing marginal social welfare of income. These attitudes are shown to be linked to widespread moral acceptance of unequal allocations due to luck. Together, these results raise the possibility that the American public views the allocations of taxes and pre-tax outcomes as morally relevant, a judgment that is inconsistent with conventional objectives depending solely on after-tax outcomes but consistent with alternative principles such as Classical Benefit-Based Taxation.

    Keywords: Equality and Inequality; Attitudes; Taxation; Theory; United States;


    Weinzierl, Matthew C. "Popular Acceptance of Morally Arbitrary Luck and Widespread Support for Classical Benefit-Based Taxation." Harvard Business School Working Paper, No. 16-104, March 2016. View Details
  10. Economic Uncertainty and Earnings Management

    Luke C.D. Stein and Charles C.Y. Wang

    In the presence of managerial short-termism and asymmetric information about skill and effort provision, firms may opportunistically shift earnings from uncertain to more certain times. We document that firms report more negative discretionary accruals when financial markets are less certain about their future prospects. Stock-price responses to earnings surprises are moderated when firm-level uncertainty is high, consistent with performance being attributed more to luck rather than skill and effort, which can create incentives to shift earnings toward lower-uncertainty periods. We show that the resulting opportunistic earnings management is concentrated in CEOs, firms, and periods where such incentives are likely to be strongest: (1) where CEO wealth is sensitive to change in the share price, (2) where announced earnings are particularly likely to be an important source of information about managerial ability and effort, and (3) before implementation of Sarbanes-Oxley made opportunistic earnings management more challenging. Our evidence highlights a novel channel through which uncertainty affects managerial decision making in the presence of agency conflicts.

    Keywords: earnings management; discretionary accruals; uncertainty; implied volatility; earnings response coefficient; Risk and Uncertainty; Earnings Management; Financial Markets;


    Stein, Luke C.D., and Charles C.Y. Wang. "Economic Uncertainty and Earnings Management." Harvard Business School Working Paper, No. 16-103, March 2016. View Details
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