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1MANAGEMENT 3200EXAM TWO OBJECTIVES FROM THE NOTESOUTSIDE READINGDECISIONMAKING 1Is decisionmaking a function of management Decisionmaking techniques are applicable and valuable to all management functions2Why do we make decisions as managersDecisions are means to an end rather than ends in themselvesTo achieve operative goals and overall organizational goals3Whats the difference between programmed and nonprogrammed decisionsProgrammed decisions are specific procedures that have been developed for repetitive and routine problemsDecisions are programmed a specific procedure has been developed Nonprogrammer decisions are specific to management problems that are novel and unique They are complex and unstructuredNo established procedure for handling themSuch decisions deserve special treatment 4Do managers make more programmed or nonprogrammed decisions in generalProgrammed 5What is decisionmaking under conditions of certaintyManager knows all the available alternatives and the outcomes associated with eachThe manager has perfect knowledge about all alternatives and their outcomesThere is no element of Certainty is an ideal situation for managerial decisionmaking Under certainty a manager simply picks the alternative with the best outcomeManagerial decisions are seldom made under conditions of certainty6What is decisionmaking under conditions of riskDecisions under risk are most commonThis condition involves a lack of complete certainty regarding the outcomes of various alternatives but an awareness of the probabilities associated with their occurrenceAlternatives are known but outcomes are in doubtExample roll a die you know they are six alternatives but the outcome is in doubt7What is decisionmaking under conditions of uncertaintyManagers dont know alternatives their potential outcomes or the probability of the outcomes occurrenceThese decisions are the most difficultDecisions under uncertainty generally occur in cases where there is no historical data available from which to infer probabilities The most common case for this type of decisionmaking involves the introduction of new technology8Which decisionmaking condition is most common Least common Most difficultMost Common Risk Least Common CertaintyMost Difficult Uncertainty 9What is the key to making good decisions under riskThe key element determining the probabilities associated with each alternative10How do programmednonprogrammed decisions and the different decisionmaking conditions relateCertainty programmedUncertainty nonprogrammedRisk can be both 11What does the traditional economic model assume about decisionmakers2 assumptions2Managers seek to maximize benefits or minimize costs ECONOMIC MAN Managers are completely rationalCompletely rational and maximize will select best solution every timeWhat we Should doPrescriptive model12Under what decisionmaking condition do decisions get made in the traditional economic modelCertainty 13What does the behavioral model assume about decisionmakersBounded rationality and satisficeDescriptive how you actually make decisionsPretty good decision with less timeeffortmore efficient14What is bounded rationalityWhat three things bound ones rationalityAdministrative Man possesses bounded rationalityManagers are unable to grasp the full complexity of managerial decisions due to both their limited mental capacity and emotions and the uncertainty of future eventsManagers rationality is bounded by these three thingsLimited mental capacityEmotionsUnforeseeable of future events15What is satisficingHow does it differ from maximizingIs it irrationalManagers dont maximize their benefits rather that managers satisficestManagers select the 1 alternative that meets a minimally acceptable standard this is called the aspiration level which is subjectively defined performance goal that alternative must meet rather than going through and evaluating all alternatives and selecting the best oneIts rational behavior given our limits its the best way to make decision16What is a heuristicWhat are the advantages of and disadvantages of heuristicsHeuristic a labor saving device a short cut a rule of thumbManagers use heuristics because of their limited information processing capabilities they help us cope with complex environments by simplifying themThey reduce the costs of thinking Advantages1 time savings and 2 they may produce more good decisions than bad decisionsDisadvantages can lead us to faulty conclusions when they lead to errors in judgment called biases 17What is the availability heuristicWhat factors cause you to overestimate the frequency of an eventUnderestimate the frequency of an eventAvailability heuristic is used when managers assess the frequency of an event by the degree to which those instances of that event are easily recalled in memoryCan be a very useful aid in decisionmaking since instances of events of greater frequency are generally recalled more easily than events of less frequencythis heuristic will often lead to accurate judgmentsIs fallible because the availability of information in memory is affected by other factors that are not related to the objective frequency of the judged eventEvents that evoke emotion are vivid are recent are easily imagined and are specific will be more available in memory more easily recalled than events that are unemotional in nature are bland are in the distant past are difficult to imagine or are vagueThese irrelevant factors cause the availability heuristic at times to lead to errors ie events are judged as more frequent than is really the caseExample yearly performance review manager will focus on what is most recent behavior seems more frequent than it really is18What is the representativeness heuristicWhats the problem with this heuristicRepresentativeness heuristic reflects the tendency of managers to assess the likelihood of an occurrence by matching it with a preexisting category ie stereotype
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