This book examines how people make decisions under risk and uncertainty in operational settings and opens the black box by specifying the cognitive processes that lead to human behavior. Drawing on economics, psychology and artificial intelligence, the book provides an innovative perspective on behavioral operations. It shows how to build optimization as well as heuristic models for describing human behavior and how to compare such models on various dimensions such as predictive power and transparency, as well as discussing interventions for improving human behavior. This book will be particularly valuable to academics and practitioners who seek to select a modeling approach that suits the operational decision at hand.
Author(s): Konstantinos V. Katsikopoulos
Publisher: Palgrave Macmillan
Year: 2023
Language: English
Pages: 241
City: London
Acknowledgments
Contents
About the Author
List of Figures
List of Tables
1 What Is Cognitive Operations?
1.1 Behavioral Operations
1.2 Cognitive Operations
Notes
Part I A Cognitive Perspective
2 Optimization and Simple Heuristics
2.1 When Do People Take Risks?
2.2 The Distinction Between Risk and Uncertainty
2.3 Expected Utility Theory
2.4 Minimax and Maximax
2.5 Two Approaches to Modeling Human Behavior
2.6 The Kind of Studies in This Book
2.7 Summary
Notes
3 Decision Under Risk
3.1 Empirical Phenomena
3.2 Prospect Theory
3.3 Priority Heuristic
3.4 Predictive Power
3.5 Cognitive Processes
3.6 Transparency
3.7 Usefulness of Output
3.8 Summary and Resources
Notes
4 Strategic Interaction
4.1 Giving and Receiving Ultimatums: Theory and Data
4.2 Inequity Aversion
4.3 Fast-and-Frugal Trees
4.4 Predicting Response Time Patterns
4.5 Cognitive Processes and Transparency
4.6 Theory Integration: Behavioral Outcomes
4.7 Beyond Bargaining Games
4.8 Summary and Segue
Notes
Part II Benefits of Cognitive Modeling
5 Inventory Control
5.1 The Newsvendor Problem: Theory and Data
5.2 Optimization
5.3 Anchoring and Adjustment Heuristic
5.4 Correction Heuristic
5.5 Predictive Power
5.6 Assessment and Integration of Models
5.7 Bounded Rationality and AI in Operations
5.8 Summary
Notes
6 Decision Under Uncertainty
6.1 A Peace-Keeping Operation: Compliance Heuristic
6.2 Making Supply Chains Flexible and Robust
6.3 Ecological Rationality
6.4 Summary and a Guide
Notes
7 Behavioral and Cognitive Interventions
7.1 Behavior with AI
7.2 Nudge and Boost
7.3 Summary
Notes
8 Lessons Learned and a Positive Look Ahead
Notes
Appendix
Chapter 3: Decision Under Risk
Chapter 4: Strategic Interaction
Chapter 5: Inventory Control
Chapter 6: Decision Under Uncertainty
Bibliography
Author Index
Subject Index
