chapter 7 decision making (management)
bounded rationality
one type of non-rational decision making; the ability of decision makers to be rational is limited by numerous constraints.
steps to rational decision making
1. identify the problem 2. generate alternatives 3. evaluate alternatives and pick the one with the maximum benefit. 4. implement the solution and evaluate
decision making problem solving steps
1. intelligence = a decision maker has to collect information about the problem. 2. design= has to think about the various courses of action. 3. choice= has to pick the most viable course of action. 4. implement and monitor= to see how well it work.
managerial functions
1. planning 2. organizing 3. leading 4. conrolling
individual responses to decision situations
1. relaxed avoidance= manager decides to take no action in the belief that there will be no great negative consequences. 2. relaxed change 3. defensive avoidance 4. panic= manager frantic to get rid of problem.
overconfidence bias
bias in which people's subjective confidence is their decision making is greater than their objective accuracy.
confirmation bias
biased way of thinking which people seek information to support their point of view and discount data that does not.
rational model of decision making
classical model; the style of decision making that explain how managers should make decisions; it assumes managers will make logical decisions that will be the optimum in furthering the organization's best interest.
decision making style
directive ,analytical, conceptual,and behavioral
decision making
is the process of identifying and choosing alternative course of action.
intuition model
making decision with gut feeling or personal experience.
(emotional) or non-rational decision making
managers assume that decision making is nearly always uncertain and risky, making it difficult for managers to make optimum decisions. satisficing model= managers seek alternatives until they find one that is satisfactory, not optimal
availability bias
tendency of managers to use information readily available from memory to make judgements, they tend to give more weight to recent events.
framing bias
the tendency of decision makers to be influenced by the way a situation or problem is presented to them.
hindsight bias
the tendency of people to view events as being more predictable than they really are
representative bias
the tendency to generalize from a small sample or a single event.
anchoring and adjustment bias
the tendency to make decisions based on an initial figure.
sunk- cost bias
way of thinking which managers add up all the money already spent on a project and concludes it is too costly to simply abandon it.
escalation commitment bias
when decision makers increase their commitment to a project despite negative information about it.