Chapter 7 Flashcards
System 1
fast, automatic, and intuitive, operating with little to no effort
intuitive and largely unconscious
make quick decisions and judgments based on patterns and experiences
System 2
slow, deliberate, and conscious, requiring intentional effort
analytical and conscious
used for complex problem-solving and analytical tasks where more thought and consideration are necessary
Decision Making
decision : choice made from available alternatives
process of identifying problems and opportunities then resolving them
rational decision assumptions
operates to accomplish est goals, problem is defines
decision maker strives for info and certainty, alternatives evaluated
criteria for evaluating alternatives is know; select alternative with max benefit
decision maker is rational and uses logic
non rational assumptions
- Decision makers lack complete information,
- managers struggle to make the best decisions,
- decisions making lacks certainty
rational model
classical
assumes managers will make a logical decision that will be in the best interest of the org
explains how managers should make decisions
non rational model
assumes that decision making is always uncertain and risky, making it difficult for managers to make optimal decisions
- deletes assumption of certainty (full knowledge) –> risk
2 models : satisficing & intuition
rational decision making stages
stage 1 : identify the problem/ opportunity
stage 2 : think up alternative solutions
stage 3 : evaluate alternatives & select a solution
stage 4 : implement & evaluate the solution chosen
rational decision making problems
- unrealistic
- takes too much time and money to come up with all possible alternatives
- not always clear or constant
- complexity of problem
- different cognitive abilities, values, skills
- imperfect info
- info overload
- diff priorities
- conflicting goals
- cognitive biases
satisficing model
behavioral model
- limited info processing leads to use of judgmental heuristics which leads to choosing a solution that meets the minimum standard of acceptance
bounded rationality
ability of decision makers to be rational is limited by numerous constraints
- complexity, time and money, cognitive capacity
insight
managers could not act truly logically bc their rationality is bounded by many restrictions
satisficing assumptions
- use incomplete and imperfect info
- constrained by bounded rationality
- tend to satisfice not optimize
satisficing pros & cons
pros :
- better understand inherent biases and limitations
cons :
- potentially less optimal solutions ( not always company’s best interest)
- inconsistency in decision making
evidence based decision making
gather and analyze high quality data or facts to develop and implement a plan of action
humans do descriptive pieces
AI does the predictive pieces
make decisions under incomplete info
big data
large quantity of data that is too large for a typical computer to handle and requires the use of new tech and stat approaches to process it
predictive analytics
combines historic data with stat models and machine learning to specify likelihood of future outcomes
data analytics
includes descriptive and predictive analytics to improve orgs efficiency and decision making accuracy through systems and software
decision making styles
directive
analytical
conceptual
behavioral
directive decision making style
- prefer simple and clear solutions
-make decisions rapidly - do not consider many alternatives
- rely on existing rules
- focus on facts
concerned with task
low tolerance for ambiguity
analytical decision making style
- prefer complex problems
- carefully analyze alternatives
- enjoy solving problems
- willing to use innovative methods
take longer to make decisions - like a lot of info and alt choice
concerned with task
high tolerance for ambiguity
conceptual decision making style
- socially oriented
- artistic
- solve problems creatively
- adopt long-term perspective
- rely on intuition
concerned with people
high tolerance for ambiguity
behavioral decision making style
- work well with others (most people oriented)
- interest in helping others
- open to suggestions
- rely on meetings
concerned with people
low tolerance for ambiguity
availability bias
use of information readily available from memory to make judgments
