Define decision making
-choosing one alternative from several
What are some example of decisions in organizations?
- employee selection
- performance appraisal
- leave vs. stay
- layovers
- strategic planning
What is a programmed decision?
- decision that occurs often enough for a decision rule to be developed
- provide guidelines regarding which alternative to choose based on the situation
What is a non programmed decision?
-decision that does not occur frequently and for which there is no established rule
What are the three approaches to explaining how people make decisions?
-rational, behavioral, integrated
Describe the rational approach to DM.
- always follow a systematic, step-by-step process when making decisions
- are dedicated to making logical choices that make most sense economically
- always have complete information
- are entirely objective
Describe the steps in rational DM.
-state the goal, identify the problem, deterimine the decision type, implement the plan, measure the outcomes.
Describe the behavioral approach to DM
- decision making is not always rational
- not a prescriptive approach
- describes how decisions are actually made rather than recommends how they should be made.
Describe the administrative model in behavioral approach
-decisions are typically made with bounded rationality rather than perfect rationality.
What is used when making decisions with bounded rationality?
rules of them
- suboptimizing
- satisficing
what is risk aversion?
-decision makers are risk-averse if they prefer a sure thing to an uncertain outcome.
What is subjective utilitie?
1k to 2k subjective utility is greater than 100k to 101k.
Describe escalation of commitment.
- also known as sunk costs effects
- persisting in a failing activity because of previously invested time, effort or money.
Describe other behaviorla tendenceies in DM
-some expressions of probability are more attractive.
What is drawing from a bowl of more beans an example of ?
-ambiguity aversion.
Why does amibuity aversion occur
-people tend to avoid ambiguities.
Why doe it occur?
- people tend to verestimate the probabilities of undesired outcomes.
- don’t have missing info in your job application
Describe temporal discounting.
-people tend to devalue consequences of the outcomes that are delayed as opposed to proximal outcomes.
Show an example between temporal discounting.
-tend to discount both future gains and losses.
What is a heuristic?
-cognitive shortcut that allow making faster decisions.
Describe representativeness heuristic.
- making judgements based on the degree to which a siuation resembles another situation.
- hire applicant that has similar life history.
Describe availability heuristic.
-making decisions using information that is easily available in memory.
What is fundamental attribution error?
-attribute other’s poor performance to internal causes and their own poor performance to external causes.
What is confirmation bias?
-taking into account information confirming their expectations and ignoring disconfirming evidence.
