After participating in this module, students understand how individuals perceive risks and uncertainties, select strategies to manage them, and make decisions. They are familiar with the following established individual-level psychological and behavioral-economic concepts and theories:

a) Dual process theories of decision making.
b) Heuristics and Biases
c)  Leading theories of decision making under risk: prospect theory, construal level theory and
d) Hedging, real options theory and escalation of commitment
e) Fairness and Pro-sociality, and collective action coordination through social norms.
f)  Nudging and applying behavioral insights.

Many processes related to acquiring, allocating, and managing resources involve substantial risks and ambiguities. This module addresses major psychological and behavioral-economic concepts and theories related to thinking and decision-making:

• Simplification of complex decisions involving risky possibilities trough the availability heuristics, mental accounting, elaboration likelihood model, reference point dependency and construal level theory
• Dual-process theories of decision making under risk, prospect theory and cumulative prospect theory (incl. loss aversion, risk aversion, ambiguity aversion, and weighing of outcomes) and the risk as feelings theory.
• Strategies used by individual decision makers to mitigate risks, such as: Risk hedging, real options approaches, and escalation of commitment.
• Social strategies, such as how fairness considerations, pro-sociality, and collective action mediated through social norms affect decision-making.
• Nudging and applying behavioral insights for real-world problems like climate change action and resource use.

Concepts and theories will be presented in lectures. Students practice their theory-application skills by presenting and discussing critical issues and applications of these theories in the seminar.

You can find the complete module description here.