COMM 292 Chapter Notes - Chapter 12: Hindsight Bias, Bounded Rationality, Knowledge Management

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Published on 14 Apr 2013
School
UBC
Department
Commerce
Course
COMM 292
COMM 292: Organizational Behaviour
Chapter 12
How Should Decisions Be Made?
Decision: the choice made from two or more alternatives
The Rational Decision-Making Process:
Rational: refers to choices that are consistent and value-maximizing within specific
constraints
Rational Decision Making Model: a six-step decision making model that describes how
individuals should behave in order to maximize some outcome
1. Define the problem
2. Identify the criteria
3. Allocate weights to the criteria
4. Develop alternatives
5. Evaluate the alternatives
6. Select the best alternative
Assumptions of the Model:
Problem clarity: the problem is clear and unambiguous
Known options: assumed the decision maker can identify all the relevant criteria and can
list alternatives
Clear preferences: rationality assumes the criteria and alternatives can be ranked and
weighted
Constant preferences: assumed that specific decision criteria are constant and the weights
are constant
No time or cost constraints: decision maker can obtain full info about criteria and
alternatives
Maximum payoff: decision maker will choose the alternative that yields the highest
perceived value
How Do Individuals Actually Make Decisions?
Bounded Rationality in Considering Alternatives:
Bounded rationality: limitations on a person's ability to interpret, process, an act on
information
Satisfice: to provide a solution that is both satisfactory and sufficient
Intuition:
Intuitive decision making: a subconscious process created out of a person's many
experiences
Judgment Shortcuts:
Overconfidence bias: error in judgment that arises from being far too optimistic about one's
own performance
Anchoring bias: a tendency to fixate on initial information, from which one then fails to
adequately adjust for subsequent information
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Document Summary

Decision: the choice made from two or more alternatives. Rational: refers to choices that are consistent and value-maximizing within specific constraints. Problem clarity: the problem is clear and unambiguous. Known options: assumed the decision maker can identify all the relevant criteria and can list alternatives. Clear preferences: rationality assumes the criteria and alternatives can be ranked and weighted. Constant preferences: assumed that specific decision criteria are constant and the weights are constant. No time or cost constraints: decision maker can obtain full info about criteria and alternatives. Maximum payoff: decision maker will choose the alternative that yields the highest perceived value. Bounded rationality: limitations on a person"s ability to interpret, process, an act on information. Satisfice: to provide a solution that is both satisfactory and sufficient. Intuitive decision making: a subconscious process created out of a person"s many experiences. Overconfidence bias: error in judgment that arises from being far too optimistic about one"s own performance.

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