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. Eve Hall: The African American Investment Fund in Milwaukee

    Steven Rogers and Alterrell Mills

    The case highlights the role of minority chambers of commerce and the background of Eve Hall, a regarded multi-sector leader asked to revive Wisconsin’s African-American chamber. This case study examines the lending options that a minority chamber of commerce considers when seeking to maximum value to their constituency. Students learn the challenges minority small business owners and entrepreneurs face, the role of non-financial institutions / community-based organizations in addressing those challenges and the financial tools available to lenders and borrowers in this segment. Students learn how to analyze financing opportunities by assessing the value proposition of chambers of commerce, developing the risk-reward profile of each party involved and deliberate as members of a board to reach a final lending decision.

    Keywords: business organization; Business Plan; change management; Decision Choices and Conditions; demographics; Diversity characteristics; ethnicity characteristics; race characteristics; investment fund; cost of capital; banks and banking; Financing and Loans; Micro Finance; interest rates; Business or company management; management styles; management succession; mission and purpose; organizational culture; Leadership Style; leadership change; business and community relations; nonprofit organizations; Wealth and Poverty; Organizations; Diversity; Ethnicity; Race; Small Business; Entrepreneurship; Financing and Loans; Decision Choices and Conditions; Employment Industry; Public Administration Industry; Financial Services Industry; Service Industry; United States; Wisconsin;

    Citation:

    Rogers, Steven, and Alterrell Mills. "Eve Hall: The African American Investment Fund in Milwaukee." Harvard Business School Case 317-076, February 2017. View Details
  2. Repairing the Damage: The Effect of Price Knowledge and Gender on Auto-Repair Price Quotes

    Meghan Busse, Ayelet Israeli and Florian Zettelmeyer

    In this paper we investigate whether sellers treat consumers differently on the basis of how well informed consumers appear to be. We implement a large-scale field experiment in which callers request price quotes from automotive repair shops. We show that sellers alter their initial price quotes depending on whether consumers appear to be correctly informed, uninformed, or misinformed about market prices. We find that repair shops quote higher prices to callers who cite a higher benchmark price. We find that women are quoted higher prices than men when callers signal that they are uninformed about market prices. However, gender differences disappear when callers mention a benchmark price for the repair. Finally, we find that repair shops are more likely to offer a price concession if asked to do so by a woman than a man.

    Keywords: pricing; price discrimination; information; internet; gender; Automobiles; field experiment; Information; Fairness; Price; Knowledge Use and Leverage; Internet; Gender; Service Industry; Auto Industry;

    Citation:

    Busse, Meghan, Ayelet Israeli, and Florian Zettelmeyer. "Repairing the Damage: The Effect of Price Knowledge and Gender on Auto-Repair Price Quotes." Journal of Marketing Research (JMR) 54, no. 1 (February 2017): 75–95. View Details
  3. X Fire Paintball & Airsoft: Is Amazon a Friend or Foe? (A)

    Feng Zhu and Angela Acocella

    Three years after launching his brick-and-mortar store, X Fire Paintball and Airsoft, Steve Herbert Sr. and his sons began selling products on Amazon.com’s third-party Marketplace and online sales expanded rapidly. Over time, X Fire noticed that products of which it had once been the only seller were now being sold by Amazon straight from X Fire’s suppliers, effectively cutting X Fire out. Amazon was also ignoring the minimum advertised price (MAP) set by manufacturers. How should X Fire defend itself? Now Amazon representatives were approaching X Fire to encourage them to sell on Amazon’s smaller but growing Canadian Marketplace. How should X Fire respond to this opportunity?

    Keywords: Ethics; Competition; Market Platforms; Online Technology; Small Business; Retail Industry; Canada;

    Citation:

    Zhu, Feng, and Angela Acocella. "X Fire Paintball & Airsoft: Is Amazon a Friend or Foe? (A)." Harvard Business School Case 617-046, January 2017. View Details
  4. Earl Gordon - Eastern Circle

    Steven Rogers and Greg White

    This case follows an entrepreneur through the process of sourcing a potential acquisition, valuing a company, and securing the funding to purchase the company. This entrepreneur must decide if he should close the deal and which financing term sheet to accept.

    Keywords: acquisition; valuation; negotiations; manufacturing; LBO; Leveraged Buyout; entrepreneurship; term sheets; deal structuring; Financial Statements; Acquisition; Leveraged Buyouts; Business Model; Forecasting and Prediction; Cost vs Benefits; Cash Flow; Borrowing and Debt; Cost of Capital; Private Equity; Negotiation Deal; Negotiation Offer; Negotiation Process; Valuation; Value Creation; California;

    Citation:

    Rogers, Steven, and Greg White. "Earl Gordon - Eastern Circle." Harvard Business School Case 317-061, January 2017. View Details
  5. Carmichael Roberts: To Create a Private Equity Firm?

    Steven Rogers and Kenneth J. Cooper

    Carmichael Roberts, a rare African-American venture capitalist, considered leaving his general partnership in a private equity firm near Boston and setting up his own in 2015. He weighed whether the timing is right, with the economy still not fully recovered from the Great Recession of 2007-2009. Where to base such a firm was another factor in his decision-making. A member of the board of the National Venture Capital Association, Roberts knew the industry was gravitating to the San Francisco Bay area, to invest in the social media and software startups centered there. His specialty and passion was bringing to market new products made from advanced materials that help people solve problems in their daily lives. That investment focus on manufacturing would go against the private equity trend, another factor he considered. But he knew few, if any, general partners at major private equity firms were focused singularly on the kinds of businesses he wanted to invest in. Roberts also took into account the possible impact on his mutually respectful relations with his fellow partners. From a housing project in Brooklyn, New York, Roberts became a scientist who did advanced study at Duke and Harvard, capped off with an MBA from MIT. He had experience as a developer of technical products for Fortune 500 companies, an executive of cutting-edge startups, and a venture capitalist for eight years. This case study also reviews how private equity investment works, the private equity spectrum, the history of venture capital, stages of venture capital funds, and their location.

    Keywords: Capital; venture capital; equity; private equity; Innovation and Invention; technological innovation; investment; investment return; ownership; going public; ownership stake; Science; science bassed business; markets; Market timing; marketplace matching; relationships; Partners and Partnerships; Capital; Private Equity; Technological Innovation; Investment Return; Going Public; Ownership Stake; Science-Based Business; Market Timing; Marketplace Matching; Partners and Partnerships; Financial Services Industry; Technology Industry; Manufacturing Industry; United States; Massachusetts; Boston; California; San Francisco; New York (city, NY);

    Citation:

    Rogers, Steven, and Kenneth J. Cooper. "Carmichael Roberts: To Create a Private Equity Firm?" Harvard Business School Case 317-079, January 2017. View Details
  6. Diversity in Innovation

    Paul A. Gompers and Sophie Q. Wang

    In this paper we document the patterns of labor market participation by women and ethnic minorities in venture capital firms and as founders of venture capital-backed startups. We show that from 1990-2016 women have been less than 10% of the entrepreneurial and venture capital labor pool, Hispanics have been around 2%, and African Americans have been less than 1%. This is despite the fact that all three groups have much higher representation in education programs that lead to careers in these sectors as well as having higher representation in other highly-compensated professions. Asians, on the other hand, have much higher representation in the venture capital and entrepreneurial sector than their overall percentages in the labor force. We explore potential supply side explanations including both education attainment as well as relevant prior job experience. We also explore the correlation between diversity and state-level variations. Finally, we discuss how these patterns are consistent with homophily-based hiring and homophily-induced information flows about career choices. We end the paper by discussing areas for future research.

    Keywords: Diversity; Gender; Entrepreneurship; Venture Capital;

    Citation:

    Gompers, Paul A., and Sophie Q. Wang. "Diversity in Innovation." Harvard Business School Working Paper, No. 17-067, January 2017. View Details
  7. The Rise and Fall of Lehman Brothers

    Stuart C. Gilson, Kristin W. Mugford and Sarah L. Abbott

    The September 2008 bankruptcy of Lehman Brothers was the largest in U.S. history. In 2007, Lehman achieved record earnings. What happened? Who is to blame?

    Keywords: bankruptcy; financial distress; Accounting policies; corporate accountability; Business ethics; Financial Reporting; Volatility; Judgments; Financial Crisis; Insolvency and Bankruptcy; Financial Liquidity; Investment Banking; Financial Management; Financial Strategy; Corporate Accountability; Corporate Disclosure; Corporate Governance; Crisis Management; Risk Management; Failure; Business and Government Relations; Banking Industry; New York (city, NY);

    Citation:

    Gilson, Stuart C., Kristin W. Mugford, and Sarah L. Abbott. "The Rise and Fall of Lehman Brothers." Harvard Business School Case 217-041, January 2017. View Details
  8. The Six CEOs of Tyco International Ltd.

    John R. Wells and Gabriel Ellsworth

    In September 2016, Johnson Controls, Inc., completed the acquisition of Tyco International PLC, a $9.9 billion business with operating profits of $884 million. The purchase consideration was $14.4 billion. Although the deal was billed as a merger, Ireland-based Tyco effectively acquired U.S.-based Johnson Controls in a tax inversion deal that saved $150 million a year in taxes. Operating synergies were estimated at $500 million over three years. Tyco International was all that remained of what 15 years earlier, in 2001, had been a $36.4 billion conglomerate with a market capitalization of $120 billion. It took the charismatic CEO, Dennis Kozlowski, 10 years to grow the business from $3 billion to $36 billion, increasing its value by more than 60 times along the way. But Kozlowski went to prison on fraud charges in 2005, and the portfolio was slowly unwound under his successor. Now in 2016, Tyco was to disappear.

    Keywords: Tyco; Dennis Kozlowski; Edward Breen; fire safety; fire protection; Security; packaging; Securities and Exchange Commission; fraud; Accounting; Accounting Audits; Earnings Management; Financial Statements; Goodwill Accounting; Acquisition; Mergers and Acquisitions; Business Conglomerates; Business Divisions; Business Exit or Shutdown; Business Growth and Maturation; Business Headquarters; Business Model; Business Organization; For-Profit Firms; Restructuring; Crime and Corruption; Engineering; Applied Optics; Chemicals; Construction; Metals and Minerals; Ethics; Finance; Cash Flow; Public Equity; Stock Options; Financing and Loans; Initial Public Offering; Profit; Revenue; Geographic Location; Geographic Scope; Global Range; Globalized Firms and Management; Multinational Firms and Management; Corporate Accountability; Corporate Disclosure; Health Care and Treatment; Business History; Executive Compensation; Selection and Staffing; Courts and Trials; Lawfulness; Lawsuits and Litigation; Business or Company Management; Goals and Objectives; Growth and Development Strategy; Market Entry and Exit; Public Ownership; Problems and Challenges; Strategy; Business Strategy; Competition; Competitive Strategy; Competitive Advantage; Consolidation; Corporate Strategy; Diversification; Expansion; Horizontal Integration; Value; Chemical Industry; Construction Industry; Consumer Products Industry; Electronics Industry; Energy Industry; Industrial Products Industry; Manufacturing Industry; Medical Devices and Supplies Industry; Mining Industry; Pharmaceutical Industry; Semiconductor Industry; Telecommunications Industry; Utilities Industry; Republic of Ireland; Switzerland; Bermuda; United States; New Hampshire;

    Citation:

    Wells, John R., and Gabriel Ellsworth. "The Six CEOs of Tyco International Ltd." Harvard Business School Case 717-459, January 2017. View Details
  9. Classtivity: Payal's Pirouette

    Jeffrey J. Bussgang and Olivia Hull

    A few months after launching a new fitness technology product, the small staff of New York startup Classtivity gathers on a Saturday in April 2013 to take stock. With one successful pivot under their belt, Classtivity is finally generating revenue and enthusiasm among customers. But cofounder and CEO Payal Kadakia has some doubts. There are signs that customers love the offering, but studios are less enthusiastic. Efforts to get customers to return to the studios after their monthly packs expire have largely failed. Kadakia must decide, preserve the product or pivot to a new business model?

    Keywords: product pivot; boutique fitness; fitness industry; market sizing; consumer technology; bundling; subscription model; two-sided marketplace; ClassPass; Entrepreneurship; Venture Capital; Business Startups; Transition; Customer Focus and Relationships; Technological Innovation; Organizational Change and Adaptation; Customer Value and Value Chain; Marketing Strategy; Failure; Business Strategy; Technology Industry; Health Industry; New York (city, NY);

    Citation:

    Bussgang, Jeffrey J., and Olivia Hull. "Classtivity: Payal's Pirouette." Harvard Business School Case 817-002, January 2017. View Details
  10. Using Charity Performance Metrics as an Excuse Not to Give

    Christine L. Exley

    There is an increasing pressure to "give wisely." In a series of experiments, this paper indeed confirms that individuals give less to charities with lower performance metrics. Part of this reduction in giving, however, appears to be driven by individuals overweighting their dislike of low performance metrics as an excuse not to give. Excuse-driven responses to performance metrics persist even when steps are taken to increase the associated cognitive dissonance and are more likely among individuals who give less in general. These results suggest that charities need to carefully consider how and with whom to share performance information.

    Keywords: charitable giving; prosocial behavior; altruism; excuses; self-serving biases; Decision Choices and Conditions; Giving and Philanthropy;

    Citation:

    Exley, Christine L. "Using Charity Performance Metrics as an Excuse Not to Give." Working Paper, December 2016. View Details
  11.  
See all faculty publications on Human Behavior and Decision Making »