Decision Making and Rationality
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Decision Making and Rationality

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Questions and Answers

What is the first step in the decision-making process?

  • Implementing the decision
  • Developing alternatives
  • Identifying the problem (correct)
  • Evaluating the decision's effectiveness
  • What is bounded rationality in decision-making?

  • Making decisions based on unlimited information
  • A process where decisions have no constraints
  • Limited cognitive ability to process all information (correct)
  • Choosing the most favorable alternative without limits
  • Which of the following describes a satisficing approach to decision-making?

  • Searching for the absolute best alternative
  • Relying solely on intuition for decisions
  • Resisting any changes to current decisions
  • Choosing the first acceptable option (correct)
  • What is the escalation of commitment in decision-making?

    <p>Ignoring negative feedback and continuing a failing course of action</p> Signup and view all the answers

    Which decision-making condition involves complete certainty about outcomes?

    <p>Certainty</p> Signup and view all the answers

    What does the maximin decision choice approach focus on?

    <p>Minimizing potential losses by making the safest choice</p> Signup and view all the answers

    Which key characteristic is NOT included in the six characteristics of an effective decision-making process?

    <p>Focus on intuition</p> Signup and view all the answers

    Which of the following represents a decision-making bias?

    <p>All of the above</p> Signup and view all the answers

    What is described as the increased commitment to a previous decision despite negative evidence?

    <p>Escalation of commitment</p> Signup and view all the answers

    What type of decision involves clearly defined goals and familiar situations?

    <p>Programmed decisions</p> Signup and view all the answers

    Which of the following is an example of a rule in decision making?

    <p>Refunds over $50 must be approved by a manager</p> Signup and view all the answers

    What characterizes a nonprogrammed decision?

    <p>Unique and nonrecurring solution</p> Signup and view all the answers

    In decision-making conditions, what does risk refer to?

    <p>A situation with estimable probabilities of outcomes</p> Signup and view all the answers

    Which decision process is inappropriate for handling structured problems?

    <p>Custom-made solutions</p> Signup and view all the answers

    What is an example of a programmed decision?

    <p>Processing refunds under a specific limit</p> Signup and view all the answers

    What does intuition in decision making rely on?

    <p>Experience and feelings</p> Signup and view all the answers

    What is the primary purpose of assigning weights to decision criteria?

    <p>To prioritize the importance of each criterion</p> Signup and view all the answers

    What is the first step in analyzing alternatives according to the decision-making process?

    <p>Identifying viable alternatives</p> Signup and view all the answers

    How are alternatives ultimately selected in the decision-making process?

    <p>By choosing the one with the highest total weight</p> Signup and view all the answers

    What characteristic differentiates rational decision making from bounded rationality?

    <p>The pursuit of maximizing all available alternatives</p> Signup and view all the answers

    What is a key assumption made about managers in the context of rational decision making?

    <p>They can identify all viable alternatives completely</p> Signup and view all the answers

    What aspect is evaluated to judge the effectiveness of a decision?

    <p>The outcomes resulting from the chosen alternatives</p> Signup and view all the answers

    What do decision makers rely on in bounded rationality when faced with alternatives?

    <p>Selecting the first satisfactory alternative encountered</p> Signup and view all the answers

    Which of the following best describes decision criteria?

    <p>Components that assist in resolving the problem at hand</p> Signup and view all the answers

    What does the minimax decision-making strategy focus on?

    <p>Minimizing maximum regret</p> Signup and view all the answers

    Which decision-making bias involves focusing on the most recent events to inform decisions?

    <p>Availability Bias</p> Signup and view all the answers

    What is a key characteristic of linear thinking style?

    <p>Utilizing external data and facts</p> Signup and view all the answers

    Which bias occurs when a decision maker unknowingly focuses primarily on initial information?

    <p>Anchoring Effect</p> Signup and view all the answers

    How does the overconfidence bias affect decision-making?

    <p>It produces unrealistically positive self-assessments</p> Signup and view all the answers

    What is a common trait of the confirmation bias?

    <p>Evaluating new information against pre-existing beliefs</p> Signup and view all the answers

    Which decision-making condition is characterized by limited information about potential outcomes?

    <p>Uncertainty</p> Signup and view all the answers

    The sunk cost error entails which of the following mistakes?

    <p>Investing more resources into a failing project due to previous investments</p> Signup and view all the answers

    Study Notes

    Decision Making

    • Decision-making is the process of choosing one alternative from two or more options.
    • A decision is a choice made after considering available options.
    • Key factors to consider when making a decision include:
      • The problem
      • The decision criteria
      • The weights assigned to each criteria
      • Available alternatives
      • The strengths and weaknesses of each alternative
      • The implementation of the selected alternative
      • The evaluation of the decision's effectiveness and outcome

    Rational Decision Making

    • Assumes that decision-makers are perfectly rational and completely objective.
    • Factors such as carefully defined problems, identified viable alternatives, specific goals, and maximizing organizational outcomes contribute to the assumptions of rational decision-making.

    Bounded Rationality

    • Recognizes that decisions are made rationally within the limitations of the decision-maker's ability to process information.
    • Decision-makers may not seek out or have access to all information about alternatives, leading to satisficing, or choosing the first acceptable option rather than seeking the perfect solution.
    • Escalation of commitment (continuing to invest in a failing course of action despite negative evidence) can be a factor in decision-making.

    Intuitive Decision Making

    • Decisions made based on accumulated experience, feelings, and judgment rather than purely logical reasoning.

    Types of Decisions

    • Structured Problems: Defined goals, familiarity, and readily available information characterize structured problems.
    • Programmed Decisions: Repetitive decision that can be handled by familiar routines and procedures.
      • Procedures: Step-by-step guidelines to respond to a structured problem.
      • Rules: Explicit statements limiting actions of managers or employees.
      • Policy: General guidelines for decisions about structured problems.
    • Unstructured Problems: New, unusual problems with ambiguous or incomplete information requiring custom solutions.
    • Nonprogrammed Decisions: Unique and nonrecurring decisions requiring unique responses.

    Decision-Making Conditions

    • Certainty: Outcomes are known with certainty, allowing for a clear decision.
    • Risk: The likelihood of outcomes can be estimated, allowing for a calculated decision.
    • Uncertainty: Limited information prevents accurate estimation of outcomes, relying on intuition, hunches, and experience.
    • Decision Choice Approaches:
      • Maximax: Optimistic approach seeking the maximum possible payoff.
      • Maximin: Pessimistic approach seeking the maximum possible outcome at the minimum level.
      • Minimax: Approach aiming to minimize the maximum possible regret.

    Decision-Making Styles

    • Linear Thinking Style: Focuses on external data and facts, processing information through logic and reason.
    • Nonlinear Thinking Style: Relies on internal sources of information, intuition, feelings, and hunches.

    Decision-Making Biases and Errors

    • Heuristics: Rules of thumb used to simplify decision making.
    • Overconfidence Bias: Overestimating one's own abilities and performance.
    • Immediate Gratification Bias: Favoring immediate rewards and avoiding immediate costs.
    • Anchoring Effect: Fixating on initial information, ignoring subsequent information.
    • Selective Perception Bias: Interpreting information based on personal perceptions.
    • Confirmation Bias: Seeking out information that confirms past choices and disregarding conflicting information.
    • Framing Bias: Highlighting certain aspects while ignoring others when framing a situation.
    • Availability Bias: Focusing on recent events, losing objectivity.
    • Representation Bias: Drawing analogies between situations that are not similar.
    • Randomness Bias: Finding meaning in random events.
    • Sunk Costs Errors: Not recognizing that current actions cannot influence past events.
    • Self-Serving Bias: Taking credit for success, blaming outside factors for failures.
    • Hindsight Bias: Mistakenly believing events could have been predicted after knowing the outcome.

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    Related Documents

    Chapter 4 Decision-Making PDF

    Description

    Explore the essential principles of decision making, including rational decision-making and bounded rationality. This quiz covers important concepts such as choice alternatives, decision criteria, and the evaluation of decision outcomes. Test your understanding of how these theories apply to effective decision making.

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