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. Risk Management—The Revealing Hand

    Robert S. Kaplan and Anette Mikes

    Many believe that the recent emphasis on enterprise risk management function is misguided, especially after the failure of sophisticated quantitative risk models during the global financial crisis. The concern is that top-down risk management will inhibit innovation and entrepreneurial activities. We disagree and argue that risk management should function as a Revealing Hand to identify, assess, and mitigate risks in a cost-efficient manner. Done well, the Revealing Hand of risk management adds value to firms by allowing them to take on riskier projects and strategies. But risk management must overcome severe individual and organizational biases that prevent managers and employees from thinking deeply and analytically about their risk exposure. In this paper, we draw lessons from seven case studies about the multiple and contingent ways that a corporate risk function can foster highly interactive and intrusive dialogues to surface and prioritize risks, help to allocate resources to mitigate them, and bring clarity to the value trade-offs and moral dilemmas that lurk in those decisions.

    Keywords: Risk Management;


    Kaplan, Robert S., and Anette Mikes. "Risk Management—The Revealing Hand." Journal of Applied Corporate Finance 28, no. 1 (Winter 2016): 8–18. View Details
  2. When and Why Randomized Response Techniques (Fail to) Elicit the Truth

    Leslie K. John, George Loewenstein, Alessandro Acquisti and Joachim Vosgerau

    By adding random noise to individual responses, randomized response techniques (RRTs) are intended to enhance privacy protection and encourage honest disclosure of sensitive information. Empirical findings on their success in doing so are, however, mixed. Supporting the idea that the noise introduced by RRTs can make respondents concerned that innocuous responses will be interpreted as admissions, seven experiments involving over 3,000 respondents document that RRTs can, paradoxically, yield prevalence estimates that are lower than direct questioning (Studies 1-5), less accurate than direct questioning (Studies 1, 3, & 4B-C), and even impossible (negative prevalence estimates, Studies 3, 4A-C, & 5). The paradox is reduced when the target behavior is framed as socially desirable (Study 2) and is mediated by respondents’ concerns over response misinterpretation (Study 3). A simple modification designed to reduce apprehension over response ambiguity reduces the problem (Studies 4A-C), particularly when concerns over response ambiguity are heightened (Study 5).

    Keywords: Corporate Disclosure; Cognition and Thinking;


    John, Leslie K., George Loewenstein, Alessandro Acquisti, and Joachim Vosgerau. "When and Why Randomized Response Techniques (Fail to) Elicit the Truth." Harvard Business School Working Paper, No. 16-125, May 2016. View Details
  3. 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
  4. When Performance Trumps Gender Bias: Joint Versus Separate Evaluation

    Iris Bohnet, Alexandra van Geen and Max Bazerman

    We examine a new intervention to overcome gender biases in hiring, promotion, and job assignments: an "evaluation nudge," in which people are evaluated jointly rather than separately regarding their future performance. Evaluators are more likely to focus on individual performance in joint than in separate evaluation and on group stereotypes in separate than in joint evaluation, making joint evaluation the money-maximizing evaluation procedure. Our findings are compatible with a behavioral model of information processing and with the System 1/System 2 distinction in behavioral decision research where people have two distinct modes of thinking that are activated under certain conditions.

    Keywords: Prejudice and Bias; Selection and Staffing; Decision Choices and Conditions; Performance; Gender;


    Bohnet, Iris, Alexandra van Geen, and Max Bazerman. "When Performance Trumps Gender Bias: Joint Versus Separate Evaluation." Management Science 62, no. 5 (May 2016): 1225–1234. View Details
  5. The Walt Disney Studios

    Anita Elberse

    In December 2015, Alan Horn, chairman of The Walt Disney Studios, celebrates the world premiere of Star Wars: The Force Awakens—only the latest in a string of big bets that he has overseen. Disney pursues a ‘tentpole strategy’ that revolves around at least eight big-budget movies each year—most from its acquired labels Pixar, Marvel Studios, and Lucasfilm. In fact, Disney produces nearly twice as many tentpole movies as any other major Hollywood film studio, but fewer movies overall than all but one of its rivals. Box-office failures can be extremely costly, since Disney (unlike its rivals) chooses not to enlist the help of financing partners. Is Disney Studios pursuing the right number of tentpoles as well as the right mix of new versus existing properties, under the right financing structure? And will the tentpole strategy pay off—in the short and long run?

    Keywords: entertainment; media; movie industry; film; Creative Industries; product portfolio management; innovation; branding; Talent; marketing; strategy; blockbuster; superstar; Strategy; Talent and Talent Management; Creativity; Product Launch; Film Entertainment; Brands and Branding; Product Development; Entertainment and Recreation Industry;


    Elberse, Anita. "The Walt Disney Studios." Harvard Business School Case 516-105, April 2016. View Details
  6. What Do Measures of Real-Time Corporate Sales Tell Us About Earnings Surprises and Post-announcement Returns?

    Kenneth A. Froot, Namho Kang, Gideon Ozik and Ronnie Sadka

    We develop real-time proxies of retail corporate sales from multiple sources, including approximately 50 million mobile devices. These measures contain information from both the earnings quarter (within quarter) and the period between that quarter's end and the earnings announcement date (post quarter). Our within-quarter measure is powerful in explaining quarterly sales growth, revenue surprises, and earnings surprises, generating average excess returns at announcement of 3.4%. However, surprisingly, our post-quarter measure is related negatively to announcement returns and positively to post-announcement returns. When post-quarter private information is directionally strong, managers, at announcement, provide guidance and use language that points statistically in the opposite direction. This effect is more pronounced when, post-announcement, management insiders trade. We conclude managers do not fully disclose their private information and instead message to shareholders and analysts something of opposite sign. The data suggest they may be motivated in part by subsequent personal stock-trading opportunities.

    Keywords: Communication Intention and Meaning; Ethics; Financial Reporting; Sales;


    Froot, Kenneth A., Namho Kang, Gideon Ozik, and Ronnie Sadka. "What Do Measures of Real-Time Corporate Sales Tell Us About Earnings Surprises and Post-announcement Returns?" Harvard Business School Working Paper, No. 16-123, April 2016. View Details
  7. 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
  8. 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
  9. Antonio Serra and the Economics of Good Government

    Rosario Patalano and Sophus A. Reinert

    Little is known of Antonio Serra except that he wrote his extraordinary 1613 Short Treatise on the Causes That Make Kingdoms Abound in Gold and Silver even in the Absence of Mines in a Neapolitan jail and that he died there soon afterwards. However, the influence of this work represents a watershed not only in the discipline of economics but also in the history of social science and intellectual history more generally.

    In this book, some of the world's leading economists and experts on Serra explore the enduring appeal of his Short Treatise. The authors analyse the work in its historical, economic, cultural, and intellectual contexts, exploring the finer details of his theories regarding economic development and international financial interactions, as well as his indebtedness to earlier Renaissance traditions.

    The book also uncovers new material relating to Serra's life and provides in-depth interpretation of his key insights, influences, and political economy. This book highlights the parallels between issues discussed by Serra and modern political and scholarly consciousness and illustrates the importance and influences of historical debate in modern economic thinking.

    Keywords: History; Books; Government and Politics; Economics;


    Patalano, Rosario and Sophus A. Reinert, eds. Antonio Serra and the Economics of Good Government. Palgrave Studies in the History of Finance. New York: Palgrave Macmillan, 2016. View Details
  10. ASOS PLC

    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
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