- Consulting Editors
- The Oxford Handbook of Managerial Economics
- Managerial Economics: Introduction and Overview
- Managerial Economics: Present And Future
- Market Power: How Does it Arise? How is it Measured?
- Advances in Cost Frontier Analysis of the Firm
- Supply Chain Design for Managing Disruptive Risks
- Combinatorial Auctions
- Game and Information Theory in Modern Managerial Economics
- Issues in the Analysis of Time, Risk, and Uncertainty
- Behavioral Economics and Strategic Decision Making
- Advances in Pricing Strategies and Tactics
- Product Distribution and Promotion: An Analytical Marketing Perspective
- Market Imperfections and Sustainable Competitive Advantage
- The New Managerial Economics of Firm Growth: The Role of Intangible Assets and Capabilities
- Strategies for Network Industries
- Internalization Theory as the General Theory of International Strategic Management Past, Present and Future
- Competitive Strategy in the Nonprofit Sector
- Organizational Design and Firm Performance
- Design and Implementation of Pay for Performance
- Vertical Merger
- The Evolving Modern Theory of the Firm
- Financing the Business Firm
- Corporate Governance and Firm Performance
- Managing Workplace Safety and Health
- Merger Strategies And Antitrust Concerns
- On the Profitability of Corporate Environmentalism
- Name Index
- Subject Index
Abstract and Keywords
Modern strategic decision theory focuses on those actions taken by senior executives (on behalf of the owners) that commit substantial resources, set precedents, and create waves of less important decisions. This chapter explores key behavioral assumptions that dispute the notion that strategic decisions are wholly rational in a neoclassical economics sense. It classifies deviations from rationality as non-standard preferences, non-standard beliefs, and non-standard decisions. Insights are provided on how behavioral economics can be applied to strategic decisions in organizational settings, and moreover on how behavioral economics can be enriched by asking questions that are unique to the role of executives making strategic decisions within firms.
Massimo Garbuio is a Lecturer at the University of Sydney Business School.
Dan Lovallo is Professor of Business Strategy at the University of Sydney Business School. His research focuses on the psychology of strategic decision making and has been published in the American Economic Review, Management Science, and the Harvard Business Review. He has previously held positions at Wharton, the Australian Graduate School of Management, and McKinsey & Co.
Elif Ketenciouglu is a PhD student at the University of Sydney Business School.
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