Chapter 11 - Decision Making

Question 1

Define Decision Making.

Answer 1

Process of developing a commitment to some course of action and problem solving.

Question 2

When does a problem exist ?

Answer 2

When a gap is perceived between some existing state and some desired state.

Question 3

Define a well-structured problem.

Answer 3

The existing state is clear, the desired state is clear, and how to get from one state to the other is fairly obvious.

Question 4

Describe ill-structured problems.

Answer 4

• Existing & desired state are unclear, the method is unknown
• Usually unique, complex, and have not been encountered before
• Cannot be solved by programmed decisions
• Need to gather more info+be more self-consciously analytical.

Question 5

Give the steps of a rational decision making. (6)

Answer 5

• Problem identification
• Information Search
• Alternative Suggestions
• Evaluation of Alternatives
• Implementation of the solution
• Monitoring + Repetition and Recycling (if applied)

Question 6

What is perfect rationality ?

Answer 6

A decision strategy that is completely informed, perfectly logical and oriented towar economic gain.

Question 7

What is bounded rationality ?

Answer 7

Trying to act rationally, but being limited in its capacity to :

• acquire and process information
• time constraints
• political considerations

Question 8

What 2 concepts illustrate bounded rationality ?

Answer 8

• Framing: aspects of the presentation of the information about a problem that are assumed by the decision makers.
• Cognitive Biases: Involve assumptions and shortcuts that can improve decision making efficiency but frequently lead to serious error in judgment.

Question 9

What difficulties can bounded rationalities lea to in problem identification ?

Answer 9

• Perceptual Defense : the perceptual system may act to defend the perceiver against unpleasant perceptions
• Problem defined in terms of functional speciality
• Problem defined in term of solution (jumping to conclusions)
• Problem diagnosed in terms of symptoms (surface = few clues)

Question 10

Describe the process of information search in decision making.

Answer 10

• Bounded rationality makes information search costly and slow
• Too little information : using memory information + overconfidence which is reinforced by confirmation bias.
• Information Overload : decision quality is lowered but it allows more confidence