BUS 2090 Chapter Notes - Chapter 11: Amos Tversky, Daniel Kahneman, Confirmation Bias

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16 Aug 2016
Chapter 11 BUS2090 March 3, 2016
Unit 7 Part 1
Decision Making
11.1 What is decision making?
oThe process of developing a commitment to some course of action. Decision
making involves making a choice among several other alternatives, is a process
that involves more than simply the final choice among alternatives and the
commitment mentioned in the definition is usually applicable to commitment of
oAlso described as problem solving, a problem is a perceived gap between an
existing state and a desired state.
oWell Structured Problems: a problem for which the existing state is clear and how
to get from one state to the other is fairly obvious, simple intuitively and solutions
make room for little controversy. Because decision making is prone to error, and
takes time, organizations use programs (standardized way of problem solving) to
short-circuit the process. They usually go under labels such as rules, routines,
standard operating procedures or rule of thumb.
oIll structured problems: a problem for which the existing and desire states are
unclear and the method of getting to the desired state is unknown. They are
unusual and tend to be complex involving high degrees of uncertainty, frequently
arouse controversy and conflict. Decision makers in these cases have to be more
self-consciously analytical, can entail more political considerations.
11.2 Compleat Decision Maker- Rational Decision Making Model
oPerfect rationality is a decision strategy that is completely informed, perfectly
logical and oriented toward economic gain. This kind of person can gather info
about problems with no cost, is perfectly logical and makes decisions based solely
on economic gain.
oHerbert Simon recognized the concept of bounded rationality which is a
decision strategy that relies on limited info and that reflects time constraints and
political considerations.
oFraming is when aspects of the presentation of info about a problem are assumed
by decision makers, this could include assumptions about a problem, outcomes of
a decision or reference points used.
oCognitive Biases are tendencies to acquire and process info in an error prone
way. They constitute assumptions and shortcuts that can improve decision making
efficiency but often lead to errors in judgment.
11.3 Problem Identification and Framing
oPerceptual Defence: perceptual system may act to defend perceiver against
unpleasant perceptions.
oProblem Defined in terms of functional speciality: selective perception can cause
decision makers to be a domain of their speciality when another perspective may
be warranted.
oProblem defined in terms of solution: jumping to conclusions
oProblem diagnosed in terms of symptoms: looking only at the surface provides
only few clues.
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