Podcast
Questions and Answers
Managers operating under unbounded rationality are assumed to have a wide knowledge of all alternatives available to them.
Managers operating under unbounded rationality are assumed to have a wide knowledge of all alternatives available to them.
True (A)
Bounded rationality suggests that managers will always choose the best possible solution after evaluating every alternative.
Bounded rationality suggests that managers will always choose the best possible solution after evaluating every alternative.
False (B)
Intuitive decision making relies solely on empirical data gathered from market research.
Intuitive decision making relies solely on empirical data gathered from market research.
False (B)
Under bounded rationality, escalation of commitment refers to the ability of managers to dismiss prior decisions in order to minimize errors.
Under bounded rationality, escalation of commitment refers to the ability of managers to dismiss prior decisions in order to minimize errors.
Managers influenced by their past experiences, feelings, and cultural values are practicing a form of rational decision making.
Managers influenced by their past experiences, feelings, and cultural values are practicing a form of rational decision making.
Flashcards
Bounded Rationality
Bounded Rationality
Managers make decisions rationally, but their ability to process information is limited.
Intuitive Decision Making
Intuitive Decision Making
Managers use their experience, feelings, and judgment to make decisions. They rely on their subconscious mind and intuition.
Unbounded Rationality
Unbounded Rationality
Managers make decisions based on a set of assumptions that they are fully rational and objective, have complete information, and will always choose the option that maximizes outcomes for the organization.
Escalation of Commitment
Escalation of Commitment
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Satisficing
Satisficing
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Study Notes
Unbounded Rationality
- Managers make choices aiming for maximum value, within defined limitations.
- Assumes decision-makers are perfectly rational, objective, and logical.
- Decision-makers fully define the problem and explore all possible solutions.
- They have clear, specific goals.
- Decision-makers prioritize organizational success over personal gain.
Bounded Rationality
- Decisions are made rationally, but limited by information-processing capacity.
- Decision-makers don't explore all potential options.
- They often "satisfice" – selecting the first acceptable solution.
- Bounded rationality leads to less optimal outcomes than maximizing.
Influence on Decision Making
- Escalation of Commitment: Continuing with a poor decision despite evidence suggesting it's wrong.
- Intuitive Decision Making: Decisions based on experience, feelings, and judgment.
- Decision-making draws on prior experiences, emotions, values, skills, and knowledge.
- Managers may utilize subconscious data in their decision-making process.
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Description
Explore the concepts of unbounded and bounded rationality in decision-making. This quiz delves into how managers weigh their choices, the impact of information limitations, and the influence of commitment and intuition on organizational success.
