40 Questions
What are decision criteria in decision-making?
Factors that are important and relevant to resolving the problem
Why are weights assigned to each decision criterion?
To place the criteria in the correct priority order of their importance
What is the purpose of Step 2 in the decision-making process?
To identify decision criteria
What is the purpose of Step 3 in the decision-making process?
To allocate weights to the criteria
What is the purpose of Step 4 in the decision-making process?
To develop alternatives
What is the purpose of Step 5 in the decision-making process?
To analyze alternatives
In Exhibit 6-2, what is the weight assigned to the 'Memory and Storage' criterion?
10
What is the purpose of allocating weights to the criteria?
To prioritize the importance of each criterion
According to the concept of Bounded Rationality, what do managers do when faced with making a decision?
Choose the first alternative that satisfactorily solves the problem
What is the term for an increased commitment to a previous decision despite evidence that it may have been wrong?
Escalation of commitment
What is the main difference between maximizing and satisficing?
Maximizing involves considering all alternatives, satisficing involves choosing the first good enough option
What is the term for making decisions based on experience, feelings, and accumulated judgment?
Intuitive decision making
According to Bounded Rationality, what do managers do when they cannot analyze all information on all alternatives?
Satisfice rather than maximize
What is the main assumption of Bounded Rationality?
Managers are limited by their ability to process information
What is the result of the escalation of commitment?
Increased commitment to a previous decision despite evidence that it may have been wrong
What is the term for choosing the first alternative that satisfactorily solves the problem?
Satisficing
What is a characteristic of a structured problem?
Goals are clear
What type of decision can be handled by a routine approach?
Programmed decision
What is a series of interrelated steps to respond to a structured problem?
Procedure
What is an explicit statement that limits what a manager or employee can or cannot do?
Rule
What is the term for a decision that involves unclear goals and incomplete information?
Unstructured decision
What type of decision-making approach involves maximizing?
Maximizing
What is the purpose of a procedure in decision-making?
To respond to a structured problem
What is the benefit of a rule in decision-making?
It permits rapid and fair decisions
What is the initial step in the decision-making process?
Identifying a problem
What is the correct order of evaluating alternatives in the decision-making process?
Developed, analyzed, selected and well-implemented
What is the primary characteristic of rational decision making?
Makes consistent, value-maximizing choices
What is the primary goal of a manager in the decision-making process?
To achieve a specific goal
What is the term for the idea that managers do not make perfectly rational decisions due to cognitive limitations and complexity?
Bounded rationality
What is the primary role of a manager in an organization?
To make decisions in all four managerial functions
What is the characteristic of a manager's decision-making process?
Logical and objective
What is the primary assumption of rational decision making?
All of the above
What is the main characteristic of a situation where the decision maker is able to estimate the likelihood of certain outcomes?
Risk
What is the term for a guideline for making decisions?
Policy
What is the term for a situation where limited information prevents estimation of outcome probabilities?
Uncertainty
What is the main difference between risk and uncertainty?
Risk involves probability estimation, while uncertainty involves no probability estimation
What is the term for a situation where the decision maker is able to know the outcomes with absolute certainty?
Certainty
What is the purpose of decision-making models?
To provide a structured approach to decision-making
What is a common challenge faced by decision makers in situations of uncertainty?
Reliance on intuition and hunches
What is the term for biases that can affect decision-making?
Decision-making biases
Study Notes
Decision-Making Process
- The decision-making process involves five steps:
- Identifying decision criteria
- Allocating weights to the criteria
- Developing alternatives
- Analyzing alternatives
- Selecting an alternative
Decision Criteria
- Decision criteria are factors that are important to resolving the problem
- Examples of decision criteria include:
- Costs that will be incurred
- Risks likely to be encountered
- Outcomes that are desired
Allocating Weights to Criteria
- Decision criteria are not of equal importance
- Assigning a weight to each criterion places the items in the correct priority order of their importance in the decision-making process
Developing Alternatives
- Identifying viable alternatives that can resolve the problem
- Alternatives are listed without evaluation
Analyzing Alternatives
- Appraising each alternative's strengths and weaknesses
- An alternative's appraisal is based on its ability to resolve the issues identified in steps 2 and 3
Decision-Making Styles
- Rational decision making:
- Managers make consistent, value-maximizing choices with specified constraints
- Assumptions are that decision makers are perfectly rational, fully objective, and logical
- Bounded rationality:
- Managers make decisions rationally, but are limited by their ability to process information
- Assumptions are that decision makers will not seek out or have knowledge of all alternatives and will satisfice rather than maximize the outcome of their decision
- Intuitive decision making:
- Making decisions on the basis of experience, feelings, and accumulated judgment
- Can complement bounded rational decision making
Decision-Making Biases
- Biases affect decision making, including:
- Escalation of commitment: an increased commitment to a previous decision despite evidence that it may have been wrong
- Satisficing: choosing the first alternative encountered that satisfactorily solves the problem rather than maximizing the outcome of the decision
Decision-Making Conditions
- Structured problems:
- Involve goals that are clear
- Are familiar and easily and completely defined
- Programmed decisions:
- A repetitive decision that can be handled by a routine approach
- Uncertainty:
- Limited information prevents estimation of outcome probabilities for alternatives associated with the problem
Decision-Making Guidelines
- Policy:
- A general guide for decision making and action
- Rule:
- An explicit statement that limits what a manager or employee can or cannot do
- Procedure:
- A series of interrelated steps that a manager can use to respond to a structured problem
This quiz covers decision-making under uncertainty, including limited information, estimation of outcome probabilities, and intuition-based decision making.
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