BUS 374 Chapter Notes - Chapter 8: Prospect Theory

• School: Simon Fraser University
• Department: Business Administration
• Course: BUS 374
• Professor: Marina Puricelli

Document Summary

Choosing one alternative based on evaluation of outcomes. Decision making = process of choosing one alternative among several. Programmed decisions = well-structured, recurring decisions made according to set decision rules. Non-programmed decisions = involve non-routine, poorly structured situations w/ unclear sources of info. Rational approach: managers follow step-by-step process of decision making where. Certainty = manager knows outcomes of each alternative. Risk = has enough info to estimate probabilities of various outcomes. Uncertainty = lacks info to estimate probability, or even to identify outcomes. Cannot be made according to existing decision rules: goals established, problem identified, alternatives generated & evaluated, choice made & implemented, control exercised. Decision not always made w/ rationality & logic. Behavioural approach: acknowledge role & importance of human behaviour in decision making process. Prospect theory = ppl more motivated to avoid losses than make gains. Problem solving = finding answer to question. Creativity = capacity to generate new ideas.