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.