Decision-Making Theories in Management

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Questions and Answers

What is a key assumption of unbounded rationality in decision making?

Decision makers choose the first satisfactory alternative encountered.
Decision makers aim to maximize outcomes for the organization. (correct)
Decision makers will not seek out all viable alternatives.
Decision makers rely solely on their feelings and experiences.

Which of the following describes a characteristic of bounded rationality?

Commitment to previous decisions even in the face of contrary evidence. (correct)
Perfect rationality and objective evaluation of all alternatives.
Exclusive reliance on quantitative data for decision making.
Consistent selection of the best possible alternatives.

How does intuitive decision making differ from rational decision making?

Intuitive decision making incorporates emotions and past experiences. (correct)
Intuitive decision making is based on a logical examination of all alternatives.
Intuitive decision making follows strict protocols for decision making.
Intuitive decision making relies exclusively on statistical analysis.

What limitation do managers face according to the theory of bounded rationality?

<p>The capacity to evaluate all possible alternatives thoroughly. (D)</p> Signup and view all the answers

What is a common outcome of escalation of commitment in decision making?

<p>Continued support for a decision despite evidence indicating it was incorrect. (A)</p> Signup and view all the answers

Flashcards

Unbounded Rationality

Decision making where individuals are perfectly rational, objective, and logical; they identify all alternatives and choose the option that best meets their goals.

Bounded Rationality

Decision making where individuals are limited by their ability to process information; they use satisficing and may not consider all alternatives.

Escalation of Commitment

Continuing to invest in a decision even when evidence suggests it may be wrong, due to a desire to justify past choices.

Intuitive Decision Making

Making decisions based on experience, feelings, and intuition rather than purely on logic.

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Decision Making Influences

Individuals use their past experiences, emotions, ethical values, and skills to make decisions.

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Study Notes

Unbounded Rationality

Managers make choices aimed at maximizing value within defined limitations.
Assumes decision-makers are perfectly rational, objective, and logical.
Assumes a clearly defined problem with all viable options identified.
Assumes a specific goal focused on organizational interests, not personal gain.

Bounded Rationality

Managers make rational decisions but are constrained by information processing limitations.
Decision-makers do not explore all possible alternatives.
Decision-makers often "satisfice" – selecting the first acceptable solution, rather than maximize outcomes.
Escalation of commitment can influence decisions. This is when there's increased dedication to a prior decision despite evidence of its potential flaws.
Intuitive decision-making also plays a role, relying on experience, feelings, and accumulated judgments.

Decision-Making Influences

Managers use past experiences, emotions, ethics, and cultural values.
Decision-making incorporates subconscious data processing stemming from skills, knowledge, and training.