Decision Making

Question 1

What are the three models of decision making?

Answer 1

Basic decision model
Rational economic model
Bounded rationality model (dividend rationality)

Question 2

What are the four steps of the basic decision model?

Answer 2

1. Define problem – what are you going to solve
2. Generate alternative solutions- various ways to solve
3. Evaluate alternative solutions- number of criteria (feasibility, acceptability, cost, etc.)
4. Choose solution - choice rule

Question 3

Describe the rational economic model.

Answer 3

humans are totally rational (economists assume both customers and consumer are; can only do so much as human beings)

Question 4

What are the four steps of the rational economic model?

Answer 4

1. Define problem exactly
2. Generate all possible alternative solutions (every possible way it can be solved)
3. Evaluate all with large number of criteria
4. Choice rule – optimize (make the very best choice, choose the optimal situation)

Question 5

Describe the bounded rationality model (dividend rationality).

Answer 5

Humans have limited rationality

Question 6

What are the four steps of the bounded rationality model (dividend rationality)?

Answer 6

1. Define problem vaguely- have an idea about what is wrong but we aren’t sure (ex. losing customers)
2. Generate a few alternatives - easy to get at
3. Evaluate few on few criteria
4. Choice rule – satisfice (combing satisfactory and sufficient; just enough to get by)

Question 7

What are the advantages of group decision making over individual decision making?

Answer 7

1. More information to use to make a decision
2. Increased commitment to the decision (managers sometimes bring a group in who will do what he would do)
3. Greater understanding of decision; group members went through it so they know what things they looked at and what they rejected

Question 8

What are the disadvantages of group decision making over individual decision making?

Answer 8

1. Conformance pressures- one or two people with strong personalities take over group; so group is no better than those one or two people
2. Dominant individual or subgroup
3. More time for everyone to participate
4. Fatigue - lower quality decisions

Question 9

Define groupthink.

Answer 9

Highly cohesive group around strong leader; makes bad decisions ex. President and staff
Ex) Pearl Harbor, Bay of Pigs

Question 10

What are the characteristics of groupthink?

Answer 10

We-they perspective (we are in the inner group; we know what’s going on; those in outer group don’t know as much; dissension is looked upon as disloyalty; won’t say anything contrary to what the group comes up with
Group is in the right/ Little need to evaluate options
Dissension is disloyal /Agreement is norm

Question 11

How to reduce groupthink?

Answer 11

Outside experts - but mistrusted / Group role - Devil’s Advocate → bring up anything bad that you want; leader says I want you to look on this as an outsider to see if there are any holes or problems; can’t disobey leader so they will do as told

Question 12

Techniques for group decision making…

Answer 12

• should result in higher quality decisions

Question 13

What is brainstorming?

Answer 13

Generate large number of alternatives (as many possible solutions.

Question 14

Three rules of brainstorming are:

Answer 14

Freewheeling
Dont’ evaluate
Develop germinal ideas

Question 15

What is freewheeling?

Answer 15

idea that you keep going, don’t slow down because you’ll lose momentum (idea came from coasting down highway in fifth gear)

Question 16

What does don’t evaluate mean?

Answer 16

no matter how stupid the idea may sound, don’t critique it

Question 17

What are germinal ideas?

Answer 17

Ideas that can blossom into a lot of different solutions.

Question 18

Where does the name for the delphi technique come from?

Answer 18

Name comes from Delphi oracle→ temple in Greece that had priestesses and generals and politicians would go to oracle to found out what happened; had mystical./mysterious answers; had to dig down into it to figure it out

Question 19

What is the delphi technique?

Answer 19

Eliminate group interaction to improve decisions

Question 20

What are the four steps in the delphi technique?

Answer 20

1) Generate alternative alone
2) Evaluate alternative alone
3) Recompose list
4) Evaluate again
5) Reiterate;

Question 21

Describe the delphi technique.

Answer 21

group would come up with problem; you’d send it out and ask for solutions; individuals come up with ideas individually; send it back and find any duplications; keep doing it until you have about ten solutions that everyone agrees upon; group never physically come together; it is all done individually; do most rational work when you do it independently then accumulate it at the end; disadvantage- takes too long;

Question 22

What is the nominal group technique?

Answer 22

Reduce, but don’t eliminate group interaction

Question 23

What are the steps of the nominal group technique?

Answer 23

1) Generate alternatives alone (considered a creative task)

2) Evaluate as group (synergy within group; others ideas can bring you to another track which you can then evaluate)