BU288 Lecture Notes - Lecture 11: Sunk Costs, Bounded Rationality, Cognitive Bias
Document Summary
Process of developing a commitment to some course of action: it involves making a choice among several action alternatives, it is a process, it involves a commitment of resources. Decision making can also be described as a process of problem solving. A problem exists when a gap is perceived between some existing state and some desired state. A problem for which the existing state is clear, the desired state is clear, and how to get from one state to another is fairly obvious. These problems are simple, and their solutions arouse little controversy. They are repetitive and familiar and they can be programmed. A program is a standardized way of solving a problem. Programs short-circuit the decision making process by enabling the decision maker to go directly from problem identification to solution. They are also known as rules, routines, or rules of thumb. They provide a useful means of solving well structured problems.
