Flashcards in chapter 11: decision making Deck (94)
define decision making
the processof 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
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
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?
what do you need to make a perfectly rational decision?
you need to have all of the relevant information:
what is perfect rationality
decision strategy that is:
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?
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
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
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?
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
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 overloadis 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