Behavioural corporate decision making

I started this book with the neoclassical model of the firm, in which the firm is seen as a black box that takes in inputs and produces output. A central decision maker makes decisions to maximise the firm’s value.

This approach, although a powerful analytical tool, hides many of the interesting questions about firms. Why do they exist? How are decisions made within firms? How can good decisions be incentivised?

Our approach to these more detailed questions has also been a simplification. Each of our firm and agents within the firm were treated as simple maximisers of profit or utility. Yet, that is not how people actually behave.

In this part we sample some of the departures from this simplification.