Human behavior and decision-making

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, David Garvin in decision-making, and James Sebenius in negotiations was instrumental in shaping today’s research on Human Behavior & Decision-Making.  The multi-disciplinary nature of our research brings together faculty from various academic units here at the business school as well as from Harvard Kennedy School, our economics and psychology departments, and other top-tier Universities.  We are continuously learning and bringing real-world experience to our research as we advise companies spanning a multitude of industries and governments across the globe.  Our research focuses on the individual and explores several topic areas such as: 
  • The influence of personal biases on judgment and decision-making
  • Cognition and learning processes
  • How the perception of self and others influences behavior and choices
  • The impact of ethics on moral judgment
  • How emotion-induced incentives drive motivation
Our collaborative studies are conducted both in the field as well as the laboratory. As an example, take Michael Norton of the School's Marketing unit and his large field experiment on over 350 visitors at an American amusement park ride and study of over 150 undergraduate students to investigate drivers of prosocial behavior, or Francesca Gino, of the Negotiations, Organizations & Markets unit, and her laboratory experiments on hundreds of University students to test the relationship between honesty and creativity.  As our research provides insights into the underpinnings behind how individuals and organizations think and behave, we are helping to improve the world's understanding of how to make individual and organizational decisions more productive and positive going into the future.
 
  1. Management Practices, Relational Contracts and the Decline of General Motors

    General Motors was once regarded as one of the best managed and most successful firms in the world, but between 1980 and 2009 its share of the U.S. market fell from 62.6% to 19.8%, and in 2009 the firm went bankrupt. In this paper we argue that the conventional explanation for this decline—namely high legacy labor and health care costs—is seriously incomplete and that GM's share collapsed for many of the same reasons that many of the other highly successful American firms of the 50s, 60s, and 70s were forced from the market, including a failure to understand the nature of the competition they faced and an inability to respond effectively once they did. We focus particularly on the problems GM encountered in developing the relational contracts essential to modern design and manufacturing. We discuss a number of possible causes for these difficulties, including GM's historical practice of treating both its suppliers and its blue collar workforce as homogeneous, interchangeable entities as well as its view that expertise could be partitioned so that there was minimal overlap of knowledge amongst functions or levels in the organizational hierarchy and decisions could be made using well-defined financial criteria. We suggest that this dynamic may have important implications for our understanding of the role of management in the modern, knowledge-based firm, and for the potential revival of manufacturing in the United States.

    Keywords: Organizational Design; Management Practices and Processes; Insolvency and Bankruptcy; Manufacturing Industry; Auto Industry; United States;

    Citation:

    Helper, Susan, and Rebecca Henderson. "Management Practices, Relational Contracts and the Decline of General Motors." Journal of Economic Perspectives 28, no. 1 (Winter 2014): 49–72. View Details
  2. The Interrelationships Between Brand and Channel Choice

    We propose a framework for the joint study of the consumer's decision of where to buy and what to buy. The framework is rooted in utility theory where the utility is for a particular channel/brand combination. The framework contains firm actions, the consumer search process, the choice process, and consumer learning. We develop research questions within each of these areas. We then discuss methodological issues pertaining to the use of experimentation and econometrics. Our framework suggests that brand and channel choices are closely intertwined, and therefore studying them jointly will reveal a deeper understanding of consumer decision making in the modern marketing environment.

    Keywords: brand choice; channel choice; learning; utility theory; Marketing; Electronics Industry; Auto Industry; Information Technology Industry; Telecommunications Industry; Aerospace Industry;

    Citation:

    Neslin, Scott, Kenshuk Jerath, Anand Bodapati, Eric T. Bradlow, John A. Deighton, Sonja Gensler, Leonard Lee, et al. "The Interrelationships Between Brand and Channel Choice." Marketing Letters 25, no. 3 (September 2014): 319–330. View Details
  3. Strategical Conception of the New Evaluation System for China's Sustainable Development

    China’s sustainable development faces three challenges: firstly, the follow-up momentum of sustainable economic growth and economic transformation is insufficient; secondly, some resources and environment loads have reached their limits; thirdly, some products affecting the health and rights of the people as well as the related bodies’behavior are challenging bottom lines of the law and the moral. These three aspects require to establish a new evaluation system including the indexes of economic performance, environmental performance, and social responsibility evaluation, which cover the bodies in three levels of the national, regional, and enterprises’, for the purpose of realizing the comprehensive evaluation of economic, environmental performance, and social responsibility. Considering that the lessons from the implementation of evaluation system of the green GDP, and before the forming of the system complexity model, the easiest issues first can be taken to establish the evaluation system of the economic, environmental, and social responsibility respectively, which will be integrated in practice by the executive bodies. The strategy of new evaluation system needs adjusting the structure of the original evaluation system with the idea of reform, and requires that the related development of the rule of law, including formulating relevant laws and the legal framework. This paper proposes three specific suggestions about the new sustainable evaluation system, and emphasizes that the evaluation on the basis of the integrated report is the specific performance of the new evaluation system strategy at the level of the enterprise.

    Keywords: sustainable development,new evaluation system,integrated report; China;

    Citation:

    Eccles, Robert G., and Peijun Duan. "Strategical Conception of the New Evaluation System for China's Sustainable Development." Art. 1. Zhongguo ke xue yuan yuan kan [Bulletin of the Chinese Academy of Sciences] 29, no. 4 (2014): 401–409. View Details
  4. Evolution of Land Distribution in West Bengal 1967–2004: Role of Land Reform and Demographic Changes

    This paper studies how land reform and population growth affect land inequality and landlessness, focusing particularly on indirect effects owing to their influence on household divisions and land market transactions. Theoretical predictions of a model of household division and land transactions are successfully tested using household panel data from West Bengal spanning 1967–2004. The tenancy reform lowered inequality through its effects on household divisions and land market transactions, but its effect was quantitatively dominated by inequality-raising effects of population growth. The land distribution program lowered landlessness, but this was partly offset by targeting failures and induced increases in immigration.

    Keywords: inequality; land reform; household division; land markets; Equality and Inequality; Residency Characteristics; Property; Household Characteristics; West Bengal;

    Citation:

    Bardhan, Pranab, Michael Luca, Dilip Mookherjee, and Francisco Pino. "Evolution of Land Distribution in West Bengal 1967–2004: Role of Land Reform and Demographic Changes." Journal of Development Economics 110 (September 2014): 171–190. View Details
  5. Advancing Consumer Neuroscience

    In the first decade of consumer neuroscience, strong progress has been made in understanding how neuroscience can inform consumer decision making. Here, we sketch the development of this discipline and compare it to that of the adjacent field of neuroeconomics. We describe three new frontiers for ongoing progress at both theoretical and applied levels. First, the field will broaden its boundaries to include genetics and molecular neuroscience, each of which will provide important new insights into individual differences in decision making. Second, recent advances in computational methods will improve the accuracy and out-of-sample generalizability of predicting decisions from brain activity. Third, sophisticated meta-analyses will help consumer neuroscientists to synthesize the growing body of knowledge, providing evidence for consistency and specificity of brain activations and their reliability as measurements of consumer behavior.

    Keywords: Consumer neuroscience; Neuroeconomics; Social neuroscience; Genes; Machine learning; Meta-analysis; Consumer Behavior; Decision Making; Science;

    Citation:

    Smidts, Ale, Ming Hsu, Alan G. Sanfey, Maarten A. S. Boksem, Richard B. Ebstein, Scott A. Huettel, Joe W. Kable, et al. "Advancing Consumer Neuroscience." Marketing Letters 25, no. 3 (September 2014): 257–267. View Details
  6. Teaming at Disney Animation

    Jonathan Geibel, Director of Systems at Walt Disney Animation Studios (hereafter referred to as Disney Animation), walked through the workspace occupied by the group he had been tasked to lead. Geibel knew he was part of a creative and magical environment. The Disney studio had created more than 53 feature animated films in over three-quarters of a century – beginning with Snow White and the Seven Dwarves in 1937 through to Frozen, released in November of 2013 and awarded the Oscar® for Best Animated Feature in March 2014, the first Academy Award® in that category for Walt Disney Animation Studios. In late March 2014, Frozen became the highest-grossing animated feature, worldwide, of all time. There was a period in the history of the 90 year-old studio, not so many years ago (and prior to John Lasseter and Ed Catmull’s leadership), when Walt Disney Animation Studios had become more structured and hierarchical, and it wasn't always easy to work across departments to innovate. Yet the work, which involved both high-tech computer animation and creative storytelling, was more cross-disciplinary and dynamic than ever. Geibel wondered what he and Ron Johnson, whom he hired and teamed up with to re-envision the Systems group within Disney Animation, could do to improve the flow and the efficiency of the organization’s increasingly technical and creative work. Geibel and Johnson had already made dramatic changes in the work structure and in the physical space to promote the effective teamwork that was so essential to producing compelling, engaging animated films. Now it was time to figure out how well the changes were working, and what further changes, if any, were necessary.

    Keywords: Leading Change; Creativity; Organizational Structure; Animation Entertainment; Organizational Culture; Entertainment and Recreation Industry; United States;

    Citation:

    Edmondson, Amy C., David L. Ager, Emily Harburg, and Natalie Bartlett. "Teaming at Disney Animation." Harvard Business School Case 615-023, August 2014. View Details
  7. Female Hurricanes Are Not Deadlier than Male Hurricanes

    In a highly contentious study, Jung, Shavitt, Viswanathan and Hilbe (2014) claimed that hurricanes had higher death tolls when they had female rather than male names due to implicit gender bias. Their article includes a study of the death toll of hurricanes that made landfall in the United States and a number of behavioral survey experiments. In a letter to the editors of the Proceedings of the National Academy of Sciences of the United States of America I show that their results of the archival study are likely a function of spurious correlation and missing variable bias.

    Keywords: United States;

    Citation:

    Malter, Daniel. "Female Hurricanes Are Not Deadlier than Male Hurricanes." Proceedings of the National Academy of Sciences of the United States of America 111, no. 34 (August 26, 2014): E3496. View Details
  8. Dangerous Expectations: Breaking Rules to Resolve Cognitive Dissonance

    When entering task performance contexts we generally have expectations about both the task and how well we will perform on it. When those expectations go unmet, we experience psychological discomfort (cognitive dissonance), which we are then motivated to resolve. Prior research on expectancy disconfirmation in task performance contexts has focused on the dysfunctional consequences of disconfirming low performance expectations (i.e., stereotype threat). In this paper we focus on the dysfunctional consequences of disconfirming high performance expectations. In three studies, we find that individuals are more likely to break rules if they have been led to expect that achieving high levels of performance will be easy rather than difficult, even if breaking rules means behaving unethically. We show that this willingness to break rules is not due to differences in legitimate performance as a function of how easy people expect the task to be, or whether their expectations are set explicitly (by referring to others' performance) or implicitly (as implied by their own prior performance). Instead, using a misattribution paradigm, we show that cognitive dissonance triggered by unmet expectations drives our effects.

    Keywords: Rule breaking; Unethical Behavior; Expectancy Disconfirmation; cognitive dissonance; Misattribution; Behavior; Ethics; Cognition and Thinking;

    Citation:

    Moore, Celia, S. Wiley Wakeman, and Francesca Gino. "Dangerous Expectations: Breaking Rules to Resolve Cognitive Dissonance." Harvard Business School Working Paper, No. 15-012, August 2014. View Details
  9. The Power of Noticing: What the Best Leaders See

    This book will examine the common failure to notice critical information due to bounded awareness. The book will document a decade of research showing that even successful people fail to notice the absence of critical and readily available information in their environment due to the human tendency to focus on a limited set of information. This work is still in its formative stages, and I welcome comments about how bounded awareness affects you and your organization and how you have created solutions to such problems.

    Keywords: Interpersonal Communication; Judgments; Negotiation; Negotiation Process; Relationships;

    Citation:

    Bazerman, Max. The Power of Noticing: What the Best Leaders See. New York: Simon & Schuster, 2014. View Details
  10. Agglomeration and Innovation

    This chapter reviews academic research on the connections between agglomeration and innovation. We first describe the conceptual distinctions between invention and innovation. We then describe how these factors are frequently measured in the data and some resulting empirical regularities. Innovative activity tends to be more concentrated than industrial activity, and we discuss important findings from the literature about why this is so. We highlight the traits of cities (e.g., size, industrial diversity) that theoretical and empirical work link to innovation, and we discuss factors that help sustain these features (e.g., the localization of entrepreneurial finance).

    Keywords: Industry Clusters; Innovation and Invention;

    Citation:

    Carlino, Gerald, and William R. Kerr. "Agglomeration and Innovation." Harvard Business School Working Paper, No. 15-007, August 2014. View Details
  11.  
See all faculty publications on Human Behavior and Decision Making »