MHR 405 Study Guide - Subjective Expected Utility, Mental Models, Pattern Matching
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MHR 405 Chapter 7
Decision Making: the conscious process of making choices among alternatives with the intention of
moving toward some desired state of affairs.
Rational Choice Paradigm: the view in decision making that people should – and typically do – use logic
and all available information to choose the alternative with the highest value.
Subjective Expected Utility: the probability (expectation) of satisfaction (utility) resulting from choosing
a specific alternative in a decision.
1. Identify Problem/Opportunity
Symptom vs. Problem
2. Choose Decision Process
3. Discover/Develop Alternatives
Search, Then Develop
4. Choose Best Alternative
Subjective Expected Utility
5. Implement Choice
6. Evaluate Choice
Problems and opportunities are constructed from ambiguous information, not “given” to us
Influenced by cognitive and emotional biases
Five problem identification challenges:
1. Stakeholder Framing - Stakeholders often unintentionally filter information to amplify or supress
seriousness of the situation of bad or good news. By framing the situation, they throw a spotlight on
specific causes of symptoms and away from other possible causes.
2. Mental Models –Visual or relational images in our mind of the external world; they fill in the
information that we don’t immediately see, helping us understand and navigate in our surrounding
environment. These mental models also blind us from seeing unique problems or opportunities because
they produce a negative evaluation of things that are dissimilar to the mental model.
3. Decisive Leadership – Being decisive includes quickly forming an opinion of whether an event signals
a problem or opportunity. Consequently, eager to look effective, many leaders quickly announce
problems or opportunities before having a change to logically assess the situation.
Figure 7.1 Rational Choice making process