MGMT1135 Lecture Notes - Lecture 7: Creative Problem-Solving, Hill Climbing, Decision-Making
Week 7 - Problem Solving & Decision Making
Problem -
Gap between an actual and desired situation
Decision making-
Identifying and choosing alternative solutions that lead to a desired end result
Optimizing Model for Decision Making-
1. Ascertain the need for a decision
2. Identify all decision criteria
3. Allocate weights to criteria
4. Develop all alternatives
5. Evaluate all alternatives
6. Select best alternatives
Heuristics:
1. Mental Shortcuts - for coming to a conclusion/decision
2. Rule of Thumb - use to make decisions and judgements quickly and efficiently
Biases in Decision Making
1. Anchoring bias - decision makers are influenced by first information received about
decision
2. Status-quo bias - current baseline taken as reference point and any change is
perceived as loss
3. Escalation of commitment - tendency to stick to an ineffective course of action
4. Confirmation bias - seeking more information that supports initial idea or belief
5. Framing bias - tendency to consider risks about gains differently than risks pertaining
loss.
Estimating / Forecasting Biases
1. Overconfidence bias
a. Tendency to be overconfident about estimates or forecasts
2. Availability heuristic
a. Tendency to base decisions on information that is readily available in memory
Intuitive judgement NEVER beats a weighted regression
Gestalt Psychology
- A person has a problem when they have a goal they want to accomplish but do not know
how to do so.
Information Processing Theory
- A problem is a discrepancy between initial state and goal state. Gap between where
person now and where they want to be.
Document Summary
Week 7 - problem solving & decision making. Identifying and choosing alternative solutions that lead to a desired end result. Optimizing model for decision making: ascertain the need for a decision. Identify all decision criteria: allocate weights to criteria, develop all alternatives, evaluate all alternatives, select best alternatives. Heuristics: mental shortcuts - for coming to a conclusion/decision, rule of thumb - use to make decisions and judgements quickly and efficiently. Estimating / forecasting biases: overconfidence bias, availability heuristic how to do so. Information processing theory: tendency to be overconfident about estimates or forecasts, tendency to base decisions on information that is readily available in memory. A person has a problem when they have a goal they want to accomplish but do not know. A problem is a discrepancy between initial state and goal state. Gap between where person now and where they want to be.
