MGMT 371 Lecture Notes - Lecture 15: Availability Heuristic, Representativeness Heuristic, Bounded Rationality
Document Summary
The process of identifying issues and making choices from alternative courses of action: the heart of activity in every business. Decisions can range from being straight forward to complex like those dealing with the strategy and direction of the organization. Management is about making decisions, and evaluating a variety of alternatives. The success of an organization depends on a managers ability to make the right decisions. Theory of rational choice: the theory that individuals make decisions based on a rational thought process that optimizes self-interest. Expected utility: when confronted with a choice people try to make the best possible decision; one that maximizes their expected utility. Individuals assign a numerical value to each alternative and select the one that offers the highest payoff or profit. Step 1: a problem or opportunity is defined. Step 2: objectives and goals are identified. Step 3: objectives are weighed according to the importance of each.
