Chapter 7

Question 1

8 STEPS IN THE DECISION-MAKING PROCESS

Answer 1

1) Identifying a Problem
2) Identifying Decision Criteria
3) Allocating Weights to the Criteria
4) Developing Alternatives
5) Analyzing Alternatives
6) Selecting an Alternative
7) Implementing the Alternative
8) Evaluating Decision Effectiveness

Question 2

4 Managerial Functions

Answer 2

1) Planning
2) Organizing
3) Leading
4) Controlling

Question 3

4 Perspectives on how Managers make decisions

Answer 3

1) Rationality
2) Bounded Rationality
3)The Role of Intuition
4)The Role of Evidence-Based Management

Question 4

a decision maker who is fully objective and logical.

Answer 4

rational decision maker

Question 5

Managers make decisions rationally, but are limited (bounded) by their ability to process information.

Answer 5

bounded rationality

Question 6

making decisions on the basis of experience, feelings, and accumulated judgment.

Answer 6

intuitive decision making

Question 7

5 aspects of intuition

Answer 7

1) experience-based 2) affect-initiated 3) cognitive-based 4) values or ethics-based 5) subconscious mental processing

Question 8

the systematic use of the best available evidence to improve management practice.

Answer 8

evidence-based management

Question 9

series of sequential steps a manager uses to respond to a structured problem.

Answer 9

procedure

Question 10

an explicit statement that tells a manager what can or cannot be done.

Answer 10

rule

Question 11

a guideline for making a decision

Answer 11

policy

Question 12

straightforward problem– goal is clear, problem is familiar, information is easily defined and complete

Answer 12

structured problems

Question 13

repetitive decision that can be handled by a routine approach.

Answer 13

programmed decision

Question 14

new or unusual problems and for which information is ambiguous/incomplete; managers will rely on nonprogrammed decisions

Answer 14

unstructured problems

Question 15

decisions that are unique, nonrecurring, and involve custom-made solutions.

Answer 15

nonprogrammed decisions

Question 16

A manager can make accurate decisions because the outcome of every alternative is known.

Answer 16

Certainty

Question 17

Conditions in which the decision maker is able to estimate the likelihood of certain outcomes.

Answer 17

Risk-Taking

Question 18

Not certain about the outcomes and unable to make reasonable probability estimates

Answer 18

Uncertainty

Question 19

“maximizing the maximum possible payoff”

Answer 19

Maximax Choice

Question 20

“maximizing the minimum possible payoff”

Answer 20

Maximin Choice

Question 21

minimize his maximum “regret”

Answer 21

Minimax Choice

Question 22

Thinking style in which a person’s preference for external data/facts and processing them via logical thinking.

Answer 22

Lineart Thinking Style

Question 23

Thinking style in which a person’s preference for internal sources (feelings/intuition) and processing them via internal insights, feelings, and hunches to guide decisions and actions.

Answer 23

Nonlinear Thinking Style

Question 24

Tendency to think they know more than they do or hold unrealistically positive views of themselves and their performance

Answer 24

Overconfidence Bias

Question 25

Tendency to want immediate rewards and to avoid immediate costs – quick payoffs are more appealing than those with payoffs in the future

Answer 25

Immediate Gratification Bias

Question 26

Fixation on initial information as a starting point, but failing to adequately adjust for subsequent information – emphasis on first impressions/ideas/prices/estimates

Answer 26

Anchoring Effect

Question 27

Selective organization and interpretation of events based on biased perceptions

Answer 27

Selective Perception Bias

Question 28

Seeking out information that reaffirms past choices and discount information that contradicts past judgments

Answer 28

Confirmation Bias

Question 29

Selecting and highlighting certain aspects of a situation while excluding or downplaying others – creation of incorrect reference points

Answer 29

Framing Bias

Question 30

Tendency to remember events that are most recent and vivid in memory – results in distorted judgments and probability estimates

Answer 30

Availability Bias

Question 31

Assessing the likelihood of an event based on how closely it resembles other events or sets of events

Answer 31

Representation Bias

Question 32

Trying to create meaning out of random events – trouble dealing with chance

Answer 32

Randomness Bias

Question 33

Fixation on past expenditures in assessing choices rather than on future consequences – forgetting that current choices can’t correct the past

Answer 33

Sunk Costs Error

Question 34

Quickly taking credit for own successes and blaming failure on outside factors

Answer 34

Self-Serving Bias

Question 35

Tendency to falsely believe that they would have accurately predicted the outcome of an event once that outcome is actually known

Answer 35

Hindsight Bias