Basic Decision-Making Theory Quiz

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Questions and Answers

What is frame blindness primarily concerned with?

Developing highly structured decision-making processes.

Overcomplicating decision problems by ignoring simpler solutions. (correct)

Encouraging conformity among stakeholders.

Relying solely on data-driven analytics.

Which of the following is a characteristic of analytical thinking in decision-making?

It relies heavily on intuition and personal experience.

It is systematic and based on data. (correct)

It is less resource-intensive than intuitive methods.

It is often quicker than intuitive decision-making.

What is a key challenge in decision-making identified in the document?

Having clearly defined objectives.

Availability of sufficient data.

Competing objectives that may conflict with one another. (correct)

Streamlined decision structures.

What does the SMART method primarily aim to achieve?

Breaking complex problems into manageable parts. (C) Signup and view all the answers

Which of the following describes the sunk cost fallacy?

Continuing with a failing strategy due to prior investments. (A) Signup and view all the answers

Which technique can be used to determine attribute weights in the SMART method?

Swing weights. (D) Signup and view all the answers

What is the purpose of a value tree in decision analysis?

To visualize and map objectives and attributes. (C) Signup and view all the answers

What does the efficient frontier represent in decision-making?

The optimal balance between conflicting objectives. (B) Signup and view all the answers

Which decision-making approach is best suited for unstructured problems?

Intuition (C) Signup and view all the answers

What is a common effect of frame blindness in decision-making?

Solving the wrong problem (D) Signup and view all the answers

What is the purpose of validating value trees in decision analysis?

To ensure clarity and relevance of objectives (C) Signup and view all the answers

Which of the following is an advantage of the SMART method?

It simplifies complex problems (A) Signup and view all the answers

What does the efficient frontier help decision-makers identify?

The best trade-offs between objectives (B) Signup and view all the answers

Which action is most effective in mitigating frame blindness?

Challenge existing frames (C) Signup and view all the answers

Which technique in the SMART method aids in weighing attributes?

Swing Weighting (A) Signup and view all the answers

What characterizes the intuition-based decision-making approach?

Relies on quick judgments from experience (C) Signup and view all the answers

Study Notes

Basic Decision-Making Theory

Challenges: Risk and uncertainty, multiple conflicting objectives, complex decision structures with numerous stakeholders.
Types of Decision-Making:
- Intuition: Quick, experience-based decisions effective for unstructured problems but prone to biases.
- Analytical Thinking: Systematic and data-driven but slower and resource-intensive. Effective decisions often blend these approaches.

Frame Blindness

Definition: Mental simplifications of decision problems obscuring important details.
Impact: Solving the wrong problem (e.g., focusing on batch sizes instead of changeover times), overlooking simple solutions, sunk cost fallacy (continuing investments in failing strategies due to past expenditures), imposing imaginary constraints.

Mitigating Frame Blindness

Question existing frames and adapt them to evolving contexts
Use diverse perspectives to challenge habitual biases.

Analyzing Decisions Involving Multiple Objectives

Key Concepts: Objectives: Desired outcomes (e.g., minimizing pollution, maximizing revenue).

SMART Method (Simple Multi-Attribute Rating Technique)

Steps:
1. Define decision-makers and objectives.
2. Identify alternatives and relevant attributes.
3. Assign scores to each alternative for every attribute.
4. Determine attribute weights (e.g., using swing weights).
5. Calculate weighted averages for each alternative.
Advantages: Breaks complex problems into manageable parts, provides a defensible rationale, allows "what-if" analysis, testing decision robustness.

Long-Term Decision-Making

Challenges: High uncertainty, complex interdependencies, considering multiple potential future states.
Approaches: Use systematic methods like scenario planning to explore plausible futures, build resilience by preparing for a range of potential outcomes.

Scenario Planning

Definition: A structured method for exploring and preparing for multiple possible futures.
Steps:
1. Define the issue and time horizon.
2. Identify current trends and uncertainties.
3. Assess the impact of trends and uncertainties.
4. Construct extreme world scenarios (combining positive and negative elements).
5. Ensure scenarios are internally consistent and realistic.
Applications: Testing strategy robustness under different scenarios, identifying new business opportunities, early contingency planning.
Strengths: Encourages creative thinking, including minority opinions.
Limitations: Lack of formal theoretical foundation and limited empirical evidence.
Attributes: Measures used to assess performance against objectives.
Value Trees: Visual tools to map objectives and attributes.
Validation of Value Trees: Ensure completeness, operationality, decomposability, absence of redundancy, and parsimony.
Efficient Frontier: Identifying options offering the best trade-offs between objectives.

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Description

Test your knowledge on basic decision-making theory concepts, including challenges such as risk and uncertainty. Explore different types of decision-making, such as intuition and analytical thinking, and understand the implications of frame blindness in decision processes.