Decision-Making Process Quiz

Study Notes

Assumptions of Rational Decision Making

Individuals have complete information about available options and their outcomes.
Individuals are able to process all information rationally and without bias.
Individuals strive to make the decision that maximizes their expected utility.

Bounded Rationality

Decision-making is influenced by limitations in information processing and cognitive abilities.
Individuals make decisions based on incomplete information, simplified models, and heuristics.
This leads to "satisficing" - choosing an option that meets a minimum acceptable level rather than searching for the optimal choice.

Maximax Decision Choice Approach

Focuses on maximizing the potential maximum payoff.
This approach is optimistic and assumes the best possible outcome will occur.
It can be risky if the likelihood of achieving the maximum payoff is low.

Nonprogrammed Decisions

Unstructured and unique situations.
Require creative solutions tailored to the specific circumstances.
No established procedures or rules to guide decision-making.

Escalation of Commitment

Persisting with a decision despite negative feedback or evidence of its failure.
This occurs because individuals want to justify their initial investment or avoid admitting a mistake.
It can lead to significant financial and opportunity costs.

Essence of the Manager's Job

The text highlights that the manager's job is primarily focused on making decisions.

Decision-Making Condition: Uncertainty

Characterized by incomplete or unreliable information about alternatives and their outcomes.
Decision-makers must rely on intuition, judgment, and limited data to make choices.

Maximin Decision Choice Approach

Aims to minimize the potential maximum loss.
This approach is pessimistic and assumes the worst possible outcome will occur.
It focuses on minimizing risks and protecting against potential losses.

Programmed Decisions

Repetitive and routine decisions.
Follow established procedures, rules, and policies.
Can be automated or standardized to improve efficiency and consistency.

Concept: Sunk Cost Fallacy

Refers to the tendency to continue investing in a failing course of action due to the prior investment of time, resources, or effort.
Individuals are reluctant to accept losses and abandon past investments, even if it is no longer rational to do so.

Description

Test your knowledge of the decision-making process with this quiz based on the ninth edition of Stephen P. Robbins and Mary Coulter's book. Challenge yourself to understand the eight steps involved in making effective decisions and enhance your understanding of this essential aspect of managerial roles.