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COLLAB 2N03 Lecture Notes - Lecture 11: Bounded Rationality, Decision-Making, Satisficing

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golddonkey422
18 Oct 2015
School
McMaster University
Department
Collaborative
Course
COLLAB 2N03
Professor
Teal Mc Ateer

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Document Summary

Decision making is the process of developing a commitment to some course of action. It involves a choice, it"s a process, and there is some commitment of resources. Well structured problem is a problem for which the existing state is clear, the desired state is clear, and how to get from one state to the other is fairly obvious. Ill structured problem is one for which the existing and desired state are unclear and the method of getting to the desired state is unknown. The compleat decision maker a rational decision-making model. Perfect rationality is a decision strategy that is completely informed, perfectly logical, and oriented towards economic gain. Bounded rationality is a decision strategy that relies on limited information and that reflects time constraints and political considerations. Framing refers to aspects of the presentation of information about a problem that are assumed by decision makers.

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Related Questions

I need a clear and detailed briefing of this question by analyzing the problem by asking the below three questions and Answer to these questions will suggest solutions centered on.

Question: Snacks, Beer, and Marijuana

“Snacks food venders and beer distributors earn some monopoly profits in their local markets but see them slowly erode from various new substitutes. When California voted on legalizing marijuana, which side would you think that California beer distributors were on? What about snack food venders? Why?”

First, explain it and then analyze the problem by using these three questions:

1. Who is making the bad decision?

2. Does the decision maker have enough information to make a good decision?

3. The incentive to do so?

Answer to these questions will suggest solutions centered on:

1. Letting someone else make the decision, someone with better information or incentives

2. Giving the decision maker more information

3. Changing the decision maker’s incentives.

1. Who is making bad decisions?

2. Does the decision maker have enough information to make a good decision?

3. The incentive to do so?

The three step process is used to evaluate and analyze the decision.

The first step is used to identify the decision and the process taken up to reach on a decision. Any decision based upon only gut feeling or marketing myopia without any rational approach will lead to the bad decision.

The second step deals with the necessary information available to the decision makers. It requires an information system that consists of quantitative data as well as qualitative information. It helps in taking a rational and optimum decision of:

1. What to produce

2. How to produce

3. How much to produce

4. Where to produce

5. The most suitable market for sales and pricing strategy

The third step deals with the incentive such as stock option plans, bonus and profit sharing agreement. It prevents any agency conflict also. Therefore, the three step process prevents any moral hazard and encourage managers to take an informed decision of for the benefits of all the parties.

Question:

Is it always possible to have the information to make the best decisions? Why? (In 100-150 words)

Business management

QUESTION 1

  1. Which of the following outlines the organization's purpose, assumptions, values, and direction?

    Mission

    Purpose

    Strategic plan

    Strategic goal

    Tactical goal

2 points

QUESTION 2

  1. Scientific management focuses on

    improving the efficiency of the individual worker.

    managing the overall organization.

    using capital more efficiently.

    enhancing the social aspects of the workplace.

    creating mathematical models of organization processes.

2 points

QUESTION 3

  1. The idea that manufacturing costs per unit decrease as the number of units produced increases is known as

    economies of scale.

    venture capitalism.

    a franchising agreement.

    first-mover advantage.

    None of these.

2 points

QUESTION 4

  1. The component of strategy that indicates how the organization intends to allocate resources is

    resource deployment.

    scope.

    competitive advantage.

    synergy.

    None of these.

2 points

QUESTION 5

  1. The process of choosing one alternative from among many alternatives is called

    satisficing.

    problem solving.

    bounded rationality.

    decision making.

    None of these.

2 points

QUESTION 6

  1. Mercedes-Benz sells high quality automobiles at high prices. It uses a(n)

    differentiation strategy.

    low-cost strategy.

    diversification strategy.

    related diversification strategy.

    BCG strategy.

2 points

QUESTION 7

  1. Which of the following is NOT generally considered to be a role performed by small businesses?

    Creation of new jobs

    Development of new products

    Manufacture of materials for large businesses

    Distribution of products made by large businesses

    Provision of capital for expansion of large businesses

2 points

QUESTION 8

  1. Which of the following is a disadvantage of group decision making?

    More alternatives are likely to be generated.

    More information will be brought to bear on the problem.

    More time will be needed to make the decision.

    More communication about the decision will result.

    All of these.

2 points

QUESTION 9

  1. Which of the following is an example of an owner of a business?

    Individual investors who buy stock in that business

    Partners

    People who have legal property rights to that business

    Individuals who finance and start up a new business

    All of these.

2 points

QUESTION 10

  1. The best alternative is the most ____ alternative.

    efficient

    controllable

    profitable

    effective

    valid

2 points

QUESTION 11

  1. Which of the following decision-making models is based on the belief that human behavior is often imperfect?

    Rational

    Emotional

    Classical

    Behavioral

    Sequential

2 points

QUESTION 12

  1. A disadvantage of using interacting groups to make decisions is

    group politics.

    a void of expert opinion.

    an increase in programmed costs.

    faster decision making.

    too much brainstorming.

2 points

QUESTION 13

  1. Nokia and Samsung make cell phones that operate on the Microsoft system. They operate in the ____ industry.

    transportation

    manufacturing

    retailing

    services

    wholesaling

2 points

QUESTION 14

  1. All of the following are advantages of group decision making EXCEPT

    groupthink may occur.

    better decisions generally emerge.

    enhanced communication may result.

    more information and knowledge are available.

    None of these.

2 points

QUESTION 15

  1. Facebook operates in which industry?

    Construction

    Wholesaling

    Manufacturing

    Services

    All of these.

2 points

QUESTION 16

  1. Four friends home from college want to start a moving business to earn money during the summer. To determine whether this is a good idea, they need to find the answer to which of the following questions?

    Who are my customers, and where are they?

    Who are my competitors, and where are they?

    How can I differentiate my product from that of my competitors?

    In what quantities and at what price will my customers buy my service?

    All of these.

2 points

QUESTION 17

  1. The classical management perspective consists of

    scientific management and administrative management.

    management science and scientific management.

    behavioral management and the operations management.

    contemporary management and behavioral management.

    contingency management and universal management.

2 points

QUESTION 18

  1. Which of the following persons is a manager?

    Cardinal Timothy Dolan, Archbishop of New York

    Nick Saban, football coach at the University of Alabama

    Linda Kaplan Thaler, chief creative officer of Kaplan Thaler Group

    Marissa Mayer, CEO of Yahoo

    All of these.

2 points

QUESTION 19

  1. Organizations that provide resources to other organizations are known as

    suppliers.

    competitors.

    regulators.

    interest groups.

    importers.

2 points

QUESTION 20

  1. A(n) ____ strategy requires little initial investment, is heavily regulated, and provides little opportunity to modify products for local conditions.

    importing/exporting

    licensing

    joint venture

    direct investment

    global sourcing

2 points

QUESTION 21

  1. All of the following are included in the task environment of organizations EXCEPT

    competitors.

    customers.

    regulators.

    suppliers.

    the economy.

2 points

QUESTION 22

  1. "Decision making under risk" means the decision maker

    has no data on which to base his or her decision.

    is risk-averse, avoiding risky investments.

    knows all the risks involved in the decision.

    can estimate decision data with some probability.

    is making an important decision with long- term consequences.

2 points

QUESTION 23

  1. A standing plan that outlines the steps to be followed in a particular circumstance is called a(n)

    SOP.

    single-use plan.

    policy.

    contingency plan.

    program.

2 points

QUESTION 24

  1. Which of the following is NOT one of the reasons for new business failure described in your text?

    Sufficient capital

    Incompetence

    Neglect

    Weak control systems

    Inexperience

2 points

QUESTION 25

  1. Interpersonal skills enable managers

    to take an overall view of how the parts of the organization interrelate and to think strategically.

    to solve detailed problems for their subordinates.

    to understand and interact effectively with others in the organization.

    to diagnose organizational problems correctly.

    None of these.

2 points

QUESTION 26

  1. Herbert Simon noted that managers generally fail to make rational decisions because they are limited by their own values, skills, habits, and unconscious reflexes as well as by incomplete information. What name did Simon give this phenomenon?

    Satisficing

    Bounded rationality

    Brainstorming

    Rational decision making

    Decision framing

2 points

QUESTION 27

  1. Nike and Reebok are best described as

    strategic allies.

    competitors.

    customers.

    regulators.

    suppliers.

2 points

QUESTION 28

  1. The first person to identify the managerial functions of planning, organizing, leading, and controlling was

    Elton Mayo.

    Lillian Gilbreth.

    Henri Fayol.

    Hugo Munsterberg.

    Mary Parker Follett.

2 points

QUESTION 29

  1. Strategic goals are set by

    first-line managers.

    middle managers.

    top managers.

    stockholders.

    All of these.

2 points

QUESTION 30

  1. Using the BCG matrix, SBUs are classified on the basis of

    market growth rate and cash generation potential.

    market share and market growth rate.

    competitive advantage and financial strength.

    a strategic business unit and product life cycle.

    None of these.

2 points

QUESTION 31

  1. ____ skills are needed for specialized tasks within the organization.

    Human

    Organizational

    Conceptual

    Technical

    None of these.

2 points

QUESTION 32

  1. McGraw Hill operates in publishing and construction. This is an example of ____ diversification.

    differentiation

    unrelated

    single-product

    BCG

    related

2 points

QUESTION 33

  1. The management pioneer who performed the Hawthorne studies at Western Electric was

    Lillian Gilbreth.

    Elton Mayo.

    Henry Gantt.

    Frank Gilbreth.

    Frederick Taylor.

2 points

QUESTION 34

  1. An organization's obligation to protect and enhance the society in which it operates is called

    legal responsibility.

    ethical responsibility.

    social responsibility.

    cultural responsibility.

    societal responsibility.

2 points

QUESTION 35

  1. An entrepreneur does all of the following EXCEPT

    operate.

    organize.

    plan.

    assume risk.

    hire a professional manager.

2 points

QUESTION 36

  1. The primary purpose of the management process is to

    develop organizational goals and make logical decisions.

    organize the various functions in a logical manner.

    ensure that all employees are working together effectively.

    achieve organizational goals efficiently and effectively.

    make sure things go as planned.

2 points

QUESTION 37

  1. How do top managers spend most of their time?

    Overseeing day-to-day operations

    Routine administrative tasks

    Implementing plans of first-line managers

    Making decisions and creating goals

    Coordinating the work of first-line managers

2 points

QUESTION 38

  1. In the classical decision making model, "optimization" means

    implementing two or more alternatives simultaneously.

    choosing the alternative with the best overall expected outcomes.

    gathering the most complete information before making the decision.

    reaching a satisfactory level of performance.

    None of these.

2 points

QUESTION 39

  1. A written summary of the business strategy and its implementation plan is known as

    a niche summary.

    a first-mover advantage.

    a business plan.

    economies of scale.

    a franchise agreement.

2 points

QUESTION 40

  1. The aspects of a business that the firm performs at a higher level than its competitors are known as the firm's

    niches.

    capital-intensiveness.

    distinctive competencies.

    strategic weakness.

    first-mover advantage.

2 points

QUESTION 41

  1. For a Perkins restaurant, which of the following would be considered to be a supplier?

    A family of 5

    Wendy