To race or not to race? Rationalizing the irrational in Behavioral Economics & Finance

Twice a year, Dean Iwasawa rolls up his sleeves and teaches finance courses for the English MBA students: in the spring semester, Corporate Finance provides an introductory course providing students with a set of analytical tools to make rational corporate investment and financing decisions, and opportunities to "test-drive" by applying what they learn; in the fall, Behavioral Economics & Finance is a fascinating look into the actual behavior patterns of economic agents which matter in the market, based on recent development of cognitive psychology, their consequences in the actual market place, and businesses that face customers with those biases.

Dean Iwasawa weaves through the room as he pushes participants to rationalize their decision-making in simulations based on the circumstances presented in his case selection. In the first session of Day 3, the class discussed the Carter Racing case, in which a motorsports team, believing that temperature affects their team's performance, attempts to determine whether to race using a cost-benefit risk tree analysis based on previous failures and victories under similar conditions.