Management Decision Making Insights

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Questions and Answers

What is a key characteristic of unbounded rationality in the decision-making process?

Decision makers rely heavily on emotions and feelings.
Decision makers have perfectly defined the problem and all alternatives. (correct)
Decision makers choose the first satisfactory alternative.
Decision makers base choices solely on past experiences.

Which of the following best describes bounded rationality?

Decision making that involves maximizing the outcomes with all available information.
Decision making that is constrained by the decision maker's information processing capability. (correct)
Decision making that relies exclusively on ethical values.
Decision making that only considers the most complex alternatives available.

What is meant by 'escalation of commitment' in decision-making?

Committing to a new decision based on irrelevant past decisions.
A rational process of reviewing all past decisions objectively.
Choosing alternatives based on emotional values only.
Increasing commitment to a decision despite evidence that it may be flawed. (correct)

Which approach does intuitive decision making primarily rely on?

<p>Feelings, accumulated judgment, and past experiences. (A)</p> Signup and view all the answers

Why might a manager choose the first satisfactory alternative instead of the best one?

<p>Perceived simplicity and reduced effort in making a decision. (B)</p> Signup and view all the answers

Flashcards

Unbounded Rationality

Decision-making model assuming managers are perfectly rational and make choices to maximize value within constraints.

Bounded Rationality

Decision-making model acknowledging managers are rational but limited by information-processing capacity.

Satisficing

Choosing the first satisfactory option encountered, rather than pursuing the absolute best.

Escalation of Commitment

Increasing commitment to a decision despite negative evidence, often driven by sunk costs or emotional attachment.

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Intuitive Decision Making

Making decisions based on experience, feelings, and accumulated judgment, often relying on subconscious patterns.

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Study Notes

Unbounded Rationality

Managers make choices that maximize value within defined limits.
Assumes decision-makers are completely rational, objective, and logical.
Assumes the problem is clearly defined with all possible alternatives identified.
Assumes a specific and clear goal exists.
Assumes the choice maximizes organizational, not personal, gain.

Bounded Rationality

Decisions are made rationally, but limited by information processing abilities.
Decision-makers don't consider all alternatives.
"Satisficing" is used: choosing the first satisfactory option instead of maximizing outcomes.
Bounded rationality can lead to escalation of commitment to previous choices, even when evidence indicates error.
Decisions are also influenced by intuition, based on experience, feelings, and judgment.

Intuitive Decision Making

Decisions are made based on past experiences, feelings, ethics, cultural values, skill, knowledge, and training.
Managers use data from subconscious thought processes to inform decisions.

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Description

Explore the concepts of unbounded and bounded rationality in management decision-making. This quiz delves into how decision-makers use rationality, the limits they face, and the impact of intuition on their choices. Gain a clearer understanding of decision-making processes in organizational settings.