MHR 523 Lecture Notes - Lecture 4: Subjective Expected Utility, Mental Model, Mental Models
19 Feb 2016
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Decision making- conscious process of making choices among alternatives with the intention of moving toward some desired state of affairs. Rational choice paradigm the view in decision making that people should. - typically do - -use logic and all available information to choose the alternative with the highest value. *business leaders would define effective decision making as: Subjective expected utility the probability (expectation) of satisfaction (utility) resulting from choose specific alternative. *rational choice assumes the decision makers will choose the alternative that has the greatest level of happiness such as highest returns for shareholders. Rational choice decision making process: identify problem or opportunity. Problem: current what is vs. desired situation what ought to be . Opportunity: current expectations vs. potential better situation that: choose the best decision process was not expected. If unable to find ready-made solution, design custom solution or modify an existing one: choose the best alternative. Choosing alternative with highest subjective expected utility.
