RSM260H1 Lecture Notes - Lecture 9: Bounded Rationality, Cognitive Bias, Rationality
Document Summary
Decision-making: process of developing a commitment to some course of action. Problem exists when a gap is perceived between existing state and desired state. Well-structured problem: existing state is clear, desired state is clear, how to get from one state to the other is obvious. Ill-structured problem: existing and desired states are unclear, method of getting to the desired state (even if clarified) is unknown. Bounded rationality: decision strategy relies on limited info (limited capacity to acquire and process info) and reflects time constraints and political considerations. Framing: aspects of the presentation of information about a problem that are assumed by decision-makers. Cognitive biases: tendencies to acquire and process info in a particular way that is prone to error. Tend to be overconfident about the decisions that they make. Tend to seek out info that confirms their own problem definitions and solutions (confirmation bias) Tend to remember and incorporate vivid, recent events into their decisions.
