BU288 Lecture 10: Lecture 10-11 - Ch. 11. Decision Making.docx
Document Summary
Decision making: decision making: the process of developing a commitment to some course of action. Ex: in which part of the country should we build a new plant: gather more info and be self-consciously analytical in our approach to solving such problems. The compleat decision maker rational decision-making model. Identify the problem, search for info to clarify the problem"s nature, suggest alternative solutions, evaluate the choices, pick the best, & implement. Assumptions about problem boundaries, possible outcomes, etc: gain frame: if info is framed positively, it encourages conservative decisions, loss frame: if info is framed negatively, it encourages risk, cognitive biases: tendencies to acquire/process info in an error-prone way. The biases create assumptions/shortcuts that can improve decision-making efficiency, but are inaccurate: impact of emotions/moods on decisions also illustrates bounded rationality. ***setting a default option also influences the decisions people make. ***prospect theory: is an asymmetric function because the pain from a loss pleasure of a gain in x.
