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Chapter 12

COMM 292: Chapter 12

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Department
Commerce
Course
COMM 292
Professor
Angela Kelleher
Semester
Winter

Description
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 COMM 292: Organizational Behaviour  Confirmation bias: tendency to seek out information that reaffirms past choices and to discount information that contradicts past judgments  Availability bias: tendency for people to base their judgments on information that is readily available to them rather than complete data  Escalation of commitment: an increased commitment to a previous decision despite negative information  Randomness error: tendency of individuals to believe that they can predict the outcome of random events  Winner's curse: tendency for the winning participants in an auction to pay too much for the item won  Hindsight bias: tendency to believe falsely, after an outcome of an event is actually known that one could have accurately predicted that outcome Improving Decision Making Through Knowledge Management  Knowledge management: process of organizing and distributing an organization's collective wisdom so that the right information gets to the right people at the right time o Organization that can quickly an
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