MBA 502 Quiz 3

The process of identifying problems and opportunities and then resolving them

Programmed decisions and non programmed decisions

situations occur often, decision rules can be employed

Situations are ambiguous, problem is ill-defined, complex and unique. (rare occurrence)

• a prescriptive model;
• -advises the decision maker how decisions should be made.
• -Bases a decision model a logical, factual analysis that leads the decision maker to an optimal decision. 
• ex: buying a car

• -people attempt to make logical decisions.
• -the alternative chosen offers the greatest benefits.
• -There is little uncertainty and risk in the decision.
• -Decision makers rely on rules and procedures to reach a decision.

• -Programmed decisions
• -Situations where all the alternatives are known.
• -Unambiguous decisions.
• -Situations where information is readily available.
• -Individual decision making.

• 1.Identify & define problem or opportunity: Managers must first realize that a decision must be made.
• 2. Establish Decision Criteria: determine the standards that must be met for an acceptable decision.
• 3. Weigh Criteria: rank the importance of the decision criteria.
• 4.Develop alternatives: managers must develop feasible alternative courses of action.
• 5.Evaluate: what are the advantages and disadvantages of each alternative?
• 6. Make a decision: Select the best alternative.
• 7. Implement the decision: managers must now carry out the alternative.
• 8.Examine feedback and evaluate: managers should learn from feedback. Managers should consider what went right and wrong with the decision and learn for the future.

• -a descriptive model of decision making-it makes more realistic assumptions about the decision context and human nature.
• -assumes managers have all info to make decisions
• -decision makings are risky because of time restraints, and incomplete information

• refers to people having a limited ability to process information
• -There is a large number of alternatives and information is vast so that managers cannot consider it all.
• -Decisions are limited by people's cognitive abilities

incomplete information

• -a complex decision or situation with limited information
• -Programmed or nonprogrammed decisions
• -Preferences of individuals or a group
• -Unclear alternatives
• -Greater participation through group decision making

• to seek a satisfactory decision, one that is good enough but not perfect.
• -choosing the 1st option that meets most of your needs
• (coined by Herbert Simon)

• -non-programmed decisions ruled by political concerns rather than a logical analysis of the situation
• -Not the best decision, but the alternative (decision) that will be accepted by the groups involved in the decision
• -more political the more diverse are the participants in the decision-making process.

• -are non-programmed
• -contain ambiguous information
• -entail low consensus on goals among stakeholders.
• -involve groups that can influence the decision process

Rational, Administrative, Political

• personality
• risk tolerance
• cognitive dissonance
• values

• guidelines a person uses when confronted with a choice
•    -belief about what is right or wrong
•    -what they aspire to

• 1. Theoretical-value set based on science, order, and the discovery of truth and knowledge
• 2. Economic-prioritize decisions that focus on being practical, tangible, and useful
• 3. Aesthetic-prioritize art, design, form, and harmony
• 4. Social- prioritize human interaction and membership to a group
• 5. Political- prioritize acquisition of power and dominance of others
• 6. Religious- prioritize faith, morals, and a higher power and purpose

• qualities that explain how you'll behave; how you perceive things
• introversion/extroversion
• conscientiousness
• altruism ability to deal with new situations
• neuroticism

variables related to the decision context or the external (physical and social) situation

the combined, unique effect of personality and the situation

A conflict exists among an individual's various cognitions (attitudes, beliefs, and intentions) about the consequences of a particular decision after the decision has been made.

• the decision is important psychologically or financially
• there are a number for forgone alternatives
• the foregone alternatives have many favorable features

• seek information that supports the wisdom of the decision
• selectively perceive/distort information in a way that supports the decision
• develop a less favorable view of foregone alternatives
• minimize the importance of the negative aspects of the decision and exaggerate the importance of the positive aspects

decision maker's perception of decision's possible outcomes in relation to gains or losses.

cognitive biases

• loss aversion bias
• Representativeness bias
• base rate bias
• escalating commitment
• illusion of control

• Tyversky and Kahneman
• framing of the problem influences decision making
• people prefer sure gain over risky loss

• continuing to invest resources in a failed decision
• ex-compulsive gambling

• ignores underlying probability
• manager relies on prior belief of relationships between variables despite conflicting evidence
• ex: Bill the librarian

• The tendency to judge the likelihood that something will happen by the ease with which one can recall examples of it.
• stereotyping

Manager overestimates their ability to control events

the tendency of the group to be swayed collectively can negate the benefits of group decision making

• illusion of invulnerability
• illusion of morality
• rationalization
• stereotype
• self-censorship
• unanimity
• direct pressure
• mindguards

a group technique, much like a focus group, where people with specific content knowledge are assembled to work as a group on the problem issue

a structured six step decision making process that brings seven to ten people together to make group decisions that are structured by rules, the initial group being a group in name only

a decision making tool in which several expert judges solicit anonymous responses through a series of sequential questionnaires, interspersed with summarized information and feedback of the opinions of participants, after which a final results report is prepared.