ERIM Research Clinic: Behavioral Operations Management
A vast literature on the verge of economics, management and psychology has shown that individuals and teams usually do not behave in rational fashion, but act according to principles of bounded rationality. Bounded rationality causes people to make decisions guided by heuristics and biases, and limits someone’s capacity to learn, act and make decisions.
The performance of operating systems is to a large extent dictated by people in the organization – how they make assumptions, are motivated, make decisions, and solve problems. Yet, the dominant paradigms to analyze, design and manage operating systems are formal analytical, assuming that humans behave in a fully rational fashion.
This lecture will focus on the introduction, identification, and measurement of behavioral biases and heuristics due to bounded rationality that seem most pronounced in operations and supply chain management decision-making. In particular, we focus on the archetypical newsvendor problem, and in order to be able to participate in an in-class experiment, you are kindly requested to bring a laptop.
Mandatory Gino, F. & Pisano, G. (2008). Toward a Theory of Behavioral Operations. Manufacturing & Service Operations Management, Vol. 10, Fall 2008, 676-691.
Optional Schweitzer, M.E. & Cachon, G.P. (2000). Decision Bias in the Newsvendor Problem with a Known Demand Distribution: Experimental Evidence. Management Science, Vol. 46, No. 3, 404-420