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Lecture 10

Lecture 10-11 - Ch. 11. Decision Making.docx

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Jennifer Komar

BU288 Lecture 1011Ch 11 Decision MakingTuesThurs Oct 1618 2012DECISION MAKINGDecision making the process of developing a commitment to some course of action 1Involves a choice among several action alternativesa process2Itsthat involves more than just the final choice how the decision was reached 3The commitment usually involves some commitment of resources time moneyProblem a perceived gap between an existing state and a desired state Decision making is a process of problem solving involves perception of existingdesired state and the steps needed to move from one state to the otherWellStructured ProblemsWellstructured problem 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 obvioususe programmingSimple repetitive and familiar problems with solutions that arouse little controversy Ex How much assistance should this client receive What route should this delivery truck takeProgram standardized way of solving a problem I can go directly from problem identification to solution through rules standard operating procedures rules of thumboEx UPS drivers routes are programmed to avoid lefthand turns to avoid idle waitingoPrograms are only as good as the decisionmaking process that led to the adoption of the programoEx Some application forms ask about agemarital statusviolates equal employmentIllStructured ProblemsIllstructured problem a problem for which the existing and desired states are unclear and the method of getting to the desired state is unknownUnique complex problems with high uncertainty raise controversyconflict among those interested in the decisionEx in which part of the country should we build a new plantGather more info and be selfconsciously analytical in our approach to solving such problemsTHE COMPLEAT DECISION MAKERRATIONAL DECISIONMAKING MODELIdentify the problem search for info to clarify the problems nature suggest alternative solutions evaluate the choices pick the bestimplement Monitor to ensure immediatecontinued effectiveness If difficulties occur at any point in the process repetition or recycling may be affectedPerfect rationality decision strategy thats completely informed perfectly logical and oriented toward economic gain the only criterion for decision makingHerbert Simon said nobody is perfectly rational Bounded rationality decision strategy that relies on limited info and that reflects time constraints and political considerationsoWe try to be rational but were limited in capacity to acquireprocess infooFraming sometimes subtle aspects of the presentation of info about a problem that are assumed by decision makers Assumptions about problem boundaries possible outcomes etc AGain frame if info is framed positively it encourages conservative decisions BLoss frame if info is framed negatively it encourages risk oCognitive biases tendencies to acquireprocess info in an errorprone way The biases create assumptionsshortcuts that can improve decisionmaking efficiency but are inaccurateoimpact of emotionsmoods on decisions also illustrates bounded rationality1
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