Chapter 4 Flashcards
Decision making
can be viewed as an eight-step process that involves identifying a problem, selecting an alternative, and evaluating the decision’s effectiveness.
Problem
that is, a discrepancy between an existing state of affairs and the desired state of affairs
decision criteria
step two in the decision making process. determining what factors are important to making the decision
allocate weights
determining the importance of each criteria
Developing alternatives
lists of alternatives that could solve the problem
Analyzing alternatives
analyzing each criteria to the problem
Selecting the best alternative
choosing the best alternative to alleviate the problem
decision implementation
involves conveying the decision to those affected and to obtaining their commitment
appraising the outcome of the decision
managers appraise the result of the decision
Overconfidence
occurs when decision makers think they know more they do
immediate gratification
describes decision makers who want immediate rewards but want to avoid immediate costs
anchoring effect
when decision makers fixate on initial information
selective perception
organize and interpret events based on their biased perceptions
confirmation bias
describes decision makers who seek out information that reaffirms their past choices and who discount information that contradicts past judgements
framing bias
occurs when decision makers select and highlight certain aspects of a situation while excluding others
availability bias
when decision makers focus on events that are the most recent and vivid in their memory
Representation bias
describes how decision makers assess the likelihood of an event based on how closely it resembles other events and then draw analogies and see identical situations where they don’t necessarily exist
Randomness Bias
describes when decision makers try to create meaning out of random events
sunk costs error
occurs when decision makers forget that current choices can’t correct the past.
self - serving bias
take credit for their successes and blame failures on outside factors
hindsight bias
is the tendency for decision makers to falsely believe that they would have accurately predicted the outcome of an event once that outcome is actually known
Rational Decision making
choices that are consistent and value - maximizing within specific constraints
Rational decision maker
being fully objective and logical
escalation of commitment
an increased commitment to a previous decision despite evidence that it may have been wrong
bounded rationality
managers make decisions rationally but are limited by they ability to process information
satisfice
they accept decisions that are good enough
intuitive decision making
making decisions on the basis of experience, feelings, and accumulated judgement.
Structured problems
straightforward, familiar, easily defined
Unstructured problems
new or unusual for which information is ambiguous or incomplete
programmed
repetitive decisions that can be handled using a routine approach
nonprogrammed
deciding whether to acquire another organization or to sell off an unprofitable division
certainty
a situation where a manger can make accurate decisions because the outcome of every alternative is known
Uncertainty
the decision maker is not certain about the outcomes and can’t even make probability estimates
groupthink
a form of conformity in which group members withheld deviant, minority, or unpopular views in order to give the appearance of agreement
