What is the Rational Decision Making Model?
how individuals should behave in order to create value-maximizing decisions within specified constraints
- Define the problem
- Identify the decision criteria
- Allocate weights to the criteria
- Develop the alternatives
- Evaluate the alternatives
- Select the best alternative
Define Bounded Rationality
Limitations on a person’s ability to interpret, process, and act on information
Define Rationality
refers to choices that are consistent and value-maximizing within specified constraints
Define Satisficing
First acceptable choice encountered, rather than an optional one
Define Intuition
Unconscious process created from distilled experience
Describe Group vs. Individual Decision Making
- Accuracy (G/I)
- Speed (I)
- Creativity (G)
- Acceptance (G)
- Efficiency (I)
What are the decision making issues? (8)
- overconfidence bias
- anchoring bias
- confirmation bias
- availability bias
- escalation of commitment
- randomness error
- risk aversion
- hindsight bias
Decision Making Issues: Overconfidence Bias
Error in judgement from being far too optimistic about one’s
own performance
Decision Making Issues: Anchoring Bias
Tendency to fixate on initial information, from which one then fails to
adequately adjust for subsequent information
Decision Making Issues: Confirmation Bias
Tendency to seek out information that reaffirms past choices and
to discount information that contradicts past judgements
Decision Making Issues: Availability Bias
Tendency for people to base their judgements on information that
is readily available to them rather than complete data
Decision Making Issues: Escalation of Commitment
Increased commitment to a previous decision despite
negative information
Decision Making Issues: Randomness Error
Tendency of individuals to believe that they can predict the
outcome of random events
Decision Making Issues: Risk Aversion
Tendency to prefer a sure gain of a moderate amount over a riskier
outcome, even if the riskier outcome might have a higher expected payoff
Decision Making Issues: Hindsight Bias
Tendency to believe falsely, after an outcome of an event is actually
known, that one could have accurately predicted that outcome
Group Decision Making: Criteria of Effectiveness Pros
- More complete information
- Diversity of views
- Decision quality
- Accuracy
- Creativity
- Degree of acceptance
What is Groupthink?
Phenomenon in which group pressures for conformity prevent the group
from critically appraising unusual, minority, or unpopular views
How does one minimize groupthink?
- Monitor group size
- Encourage group leaders to play an impartial role
- Appoint one group member to play the role of devil’s advocate
- Stimulate active discussion of diverse alternatives to encourage dissenting views and
more objective evaluations
Define Group-Shift
Phenomenon in which the initial positions of individual group members
become exaggerated because of the interactions of the group
What are the four ethicial decision making criteria?
- utilitarianism
- rights
- justice
- care
Ethical Decision Making: Utilitarianism
Decision focused on outcomes or consequences that emphasizes the
greatest good for the greatest number
- Promotes efficiency and productivity
- Sideline rights of some individuals
Ethical Decision Making: Justice
Impose and enforce rules fairly and impartially to ensure justice or an equitable
distribution of benefits and costs
- Favoured by union members
- Protects interests of the underrepresented and less powerful
- Encourage sense of entitlement
Ethical Decision Making: Rights
Respecting and protecting the basic rights of individuals, such as the rights to
privacy, free speech, and due process
- Protects whistle-blowers when reporting unethical or illegal practices by their
organizations to the media or to government agencies, using their right to free
speech
Ethical Decision Making: Care
“The morally correct action is the one that expresses care in protecting the special
relationships that individuals have with each other”
- Aware of needs, desires, and well-being of those to whom we are closely connected
- Difficult in being impartial in all decisions
