BEHAVIORAL ECONOMICS

Behavioral Economics Essay Assignment

Introduction

Behavioral economics studies cognitive, emotional and social factors effects on economic decisions made by an individuals and consequences returns, resource allocation and market prices. It assumes that human beings are rational in the decisions they make. Behavioral economics do not involve assumption. The difference comes in from the notion that the human behavior observation contradicts behavior of people to be perfectly rational. Therefore, the two starts from different points. Both behavioral economics and economics try to proscribe and describe patterns of human spending. The implication is that it does not only try to describe human behavior but tries to dictate human behavior. This essay consists of two parts. The first part introduces the two contrasting CEOs who are taken as cases in this essay. The second part identifies some positive and negative behavioral bias. Also strategies to overcome these biases are discussed.

Two Contrasting CEOs

To compare between two contrasting CEOs, I took the case of Michael Dell, CEO of Dell Computer Corporation and Andy Grove, CEO of Intel. I wasn't surprised to find very similar ideas and strategies between them. The bottom line is business sense in the right way. Both CEOs have incredible business sense that they could walk into any company and make it better than before. The difference between the two is how they communicate. For comparing their behavioral strategies, I reviewed their writings. Writings of the two CEOs were the only authentic accessible source available to me. Michael Dell, CEO of Dell Computer Corporation speaks mostly common sense. While Andy Grove, CEO of Intel, speaks more on the senior management level and adding common language of everyday people in the mix.

Michael Dell speaks of cutting out the middleman to ultimately increase your bottom-line, while Andy Grove mostly discusses keeping up with change in your business. Dell's approach is simple, knowing what your customer wants in order to keep them happy and satisfied which in turn can only help your business. I would say that in Dell each customer "owns" a piece of the company. There are no distributors, the customer calls in tells you exactly want they want or what they think they want and by having someone answering the phone that is knowledgeable about the product can guide the customer in the right direction for perfect end item. I say what a great idea, always keeping the customer involved so you keep making what the customer wants. How can a company that is product driven fail with that type of attitude? Grove's success comes from never being too satisfied or too comfortable with where you are in business. He spoke of many cliché's and when analyzed are used every day without thought. When testing you always hear “go with your first instinct”. What's your prediction... getting a feel of others about top-level decision making. Going to your "mid-level" leaders as the Air Force would say. I would say getting all the stakeholders involved. Research is the key to getting to the ...