Professor of Entrepreneurship
Behavioral Decision Theory; Learning; Organizational Learning; Risk; Vicarious Learning;
When organizational tasks require accurate decision-making, it is of interest to examine the quality of decisions in general, and specifically the conditions under which it deteriorates. Many important decisions are made by individuals at work who are hired to pursue organizational goals but also have individual goals, but the potential effects of having two goal sets has not seen enough theoretical and empirical treatment. >/p>The authors are particularly interested in the effects of organizational and individual goals leading to loss framing in decision-making, and in their interaction. They take predictions on loss aversion that have been explored most extensively in experimental studies and investigate them in a high-stakes field context involving organizations: football (soccer) in a European top division. The authors show that fouls (destructive play) are made rationally overall, and with reductions in rationality that follow the predictions of prospect theory. They show that the main mechanism behind the findings is that decision-making in a loss frame is less sensitive to cost/benefit calculations.