Lecture 5/6 (Behavioural theory) Flashcards
Behavioural theory definition of firm
Firms are coalitions of several groups of participants, with their own characteristics.
Participants receive inducements in return for contributions to the organization.
participants have some aspirations (=expectations)
Behavioural theory firm goals
firm objectives are established through a continuous bargaining
process between each group of participants.
Behavioural theory information availability
everyone does not have the same information.
Individuals cannot analyse and process all information available
Organizational theory on decision making
individuals face cognitive constraints, bounded
rationality, incomplete information.
individuals select the first satisficing option identified through local search and path dependency
local search meaning
search for new processes in
the areas where they already have expertise
path dependency meaning
tendency to replicate decisions from the past
Dependency factors of Bargaining power
depends on how unique/valuable is the contribution offered. The objectives may change over time
satisficing meaning
searching for a solution that
meets aspiration levels and is therefore acceptable
Strategies for organizations to work toward making rational decisions
- Debiasing
- Nudging
- Ecouraging dissent
- Routines
Debiasing meaning
training individuals to be aware of decision biases and to reduce or even eliminate
these biases in their actual decisions
Nudging meaning
any aspect of the choice architecture that alters people’s behaviour in a predictable
way without forbidding any options or significantly changing their economic incentives. To
count as a mere nudge, the intervention must be easy and cheap to avoid
Ecouraging dissent meaning
Dissent- strong difference of opinion on a particular subject
When decision-making involves more than one individual - effective strategy to address each other’s
individual biases
