Chapter 5 Decisions-makingThe decision-making processThe rational modelThe common errors in the decision-makingTypes of problems, decisions and level in theorganizationDecision-making stylesMaking-decision in groups
Chapter 5 Decisions-making The decision-making process The rational model The common errors in the decision-making Types of problems, decisions and level in the organization Decision-making styles Making-decision in groups
Exhibit 5-1 The Decision-MakingProcessDevelopmentAnalysisAllocationIdentificationIdentificationofofofweightsofaofdecisionTo criteriaalternativesalternativesproblemcriteriaSelectionImplementationEvaluationof anoftheof decisionalternativealternativeeffectiveness
Exhibit 5-1 The Decision-Making Process Identification of a problem Identification of decision criteria Allocation of weights To criteria Development of alternatives Analysis of alternatives Selection of an alternative Implementation of the alternative Evaluation of decision effectiveness
The problemA single,AllalternativesPreferencesPreferencesNo timeFinal choiceandis clear andwill maximizewell-definedare clearare constantorcostand stableconstraintseconomicunambiguousgoalistoconsequencesexistpayoffbe achievedare knownLeadtoRational Decision MakingExhibit 5-2Assumptions of Rationality
The problem A single, All alternatives Preferences Preferences No time Final choice is clear and well-defined and are clear are constant or cost will maximize unambiguous goal is to consequences and stable constraints economic be achieved are known exist payoff Lead to Rational Decision Making Exhibit 5-2 Assumptions of Rationality
Bounded RationalityThis is the behavior that people constructsimplified models that extract the essentialfeatures from problems without capturingall oftheir complexities in order todeciderationally
Bounded Rationality This is the behavior that people construct simplified models that extract the essential features from problems without capturing all of their complexities in order to decide rationally
Availability heuristicThis is the tendency to base judgments on informationthatisreadily availableRepresentative heuristicThis is the tendency for people to base judgments ofprobability on things with which they are familiarEscalationof commitmentIt refers to an increased commitment to aprevious decision despite negative information
Availability heuristic This is the tendency to base judgments on information that is readily available. Representative heuristic This is the tendency for people to base judgments of probability on things with which they are familiar. Escalation of commitment It refers to an increased commitment to a previous decision despite negative information