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define decision making

the p​rocess​of developing a commitment to some course of action

can also be described as a process of problem solving


what does decision making involve?

Making a choice among several actions alternatives

Making a commitment of resources (time, money or personnel)


when does a problem exist?

exists when a gap is perceived between some existing state and some desired state


Well-structured problems

the existing state and desired states are clear

how to get from one state to the other is fairly obvious

the solutions do not create much controversy

They are repetitive & familiar

They can be programmed


what is the most standardized way of solving a well-structured problem

by programing them


what does programing a well-structured problem do?

enable the decision maker to go directly from problem identification to solution

give rules, routines, standard operating procedures, rules of thumb

provide a useful means of solving well structured problems


what is a bad programmed solution?

a bad solution to a well-structured problem


Ill-structured problems

existing and desired states are unclear

the method of getting to the desired state is unknown

often risky decisions

They are unique and unusual problems that have not been encountered before

They tend to be complex and involve a high degree of uncertainty

They frequently arouse controversy & conflict


can Ill-structured problems be solved with programmed decisions?

nah boy


what do you need to make a perfectly rational decision?

you need to have all of the relevant information:

cost effectively

low cost

no cost


what is perfect rationality

decision strategy that is:

Completely informed

perfectly logical

oriented toward economic gain


what is the rational decision-making model?

1. identify the problem

2. search for relevant info

3. develop alternative solutions

4. evaluate alternative solutions

5. choose the best solution

6. implement the chosen solution

7. monitor and evaluate the chosen solution


what is an economic person

can gather information without cost and is completely informed

Is perfectly logical, and has only one criterion for decision making: ​economic gain


do the perfectly rational characteristics of perfect rationality exist in real decision makers?

nah boy


bounded rationality

since rational characteristics of Economic Person do not exist in real decision makers, administrators use bounded rationality

While they try to act rationally, they are limited in their capacity to:

Acquire and process information

Time constraints

Political considerations


what illustrates bounded rationality?

Framing & cognitive biases

the impact of emotions & mood on decisions


what is framing

huge impact of the way we interpret situations

refers to aspects of the presentation of information about a problem that are assumed by decision makers


true or false

How problems and decisions are framed can have a powerful impact on resulting decisions



Cognitive biases

tendencies to acquire & process information in a particular way that is prone to error


why is it that cognitive biases lead to error?

They involve assumptions & shortcuts

their goal is to improve decision making efficiency

frequently lead to error instead

basically, being on slack mode


what do ​framing and cognitive biases illustrate?

the operation of bounded reality


what are the difficulties in problem identification that stem from bounded rationality?

Perceptual defence

Problem defined in terms of functional specialty (people fix problems by using their specific knowledge)

Problem defined in terms of solution

Problem diagnosed in terms of symptoms (think on cold and sniffing)


what is the role of framing in problem identification?

When a problem is identified, it is framed in some way

the people in charge of decision making should try out alternative frames


how much access to information does the perfectly rational decision maker have?

he has free and instantaneous access to all information necessary to clarify the problem and develop alternative solutions


what does sounded rationality suggest about information search and access?

it can be slow and costly


true or false

Decision makers can have too little or too much information



what contributes to having too little information?

Several cognitive biases contribute to this

ex: when you use whatever information is most readily available

ex: the tendency to be overconfident which is exacerbated by confirmation bias

confirmation bias


confirmation bias

the tendency to seek out information that conforms to one’s own definition of or solution to a problem


what contributes to having too much information?

Information overload​is the reception of more information than is necessary to make effective decisions

People have a cognitive bias to value advice for which they have paid over free advice of equal quality



he choice of the decision alternative with the greatest expected value

The perfectly rational decision maker exhibits m​aximization