33:620:302 Study Guide - Bounded Rationality, Risk-Seeking, Sunk Costs

• School: Rutgers University
• Department: Management
• Course: 33:620:302
• Professor: Arvind Sharma

Document Summary

Opportunity: a situation in which there are possibilities to do things that read to results that exceed goals and expectations. Rational/normative model: define decision being made, establish important criteria for both process and result, consider all possible solutions and alternatives, calculate consequences of solutions versus likelihood of satisfying criteria for each alternative, choose the best option. Benefits of the rational model: the quality of decisions may be enhanced, in the sense that they follow more logically from all available knowledge and expertise. It makes the reasoning behind a decision transparent and available to scrutiny. If made public, it discourages the decider from acting on suspect considerations (such as personal advancement or avoiding bureaucratic embarrassment). Bounded rationality model: constructing simplified models that extract essential features from problems without capturing entire complexity, we can then behave rationally within the limits of the simple model, we as human being desire simple situations, cost to simplicity.