ADMS 2400 Lecture Notes - Lecture 10: Risk Aversion, Satisficing, Risk-Seeking

• School: York University
• Department: Administrative Studies
• Course: ADMS 2400
• Professor: Len Karakowsky

Document Summary

Describes how individuals should behave in order to maximize some outcome. The model describes a series of steps that individuals or teams should follow to increase the likelihood that their decisions will be logical and well founded. Assumptions of rational model of decision making: all alternatives and consequences are known, preferences are clear, preferences are constant and stable, no time constraints exist, final choice will maximize payoff, problem is clear and unambiguous. Many decision situations do not have those characteristics! Those assumptions may hold for routine decisions where outcomes can be clearly identified for each choice and so there is little uncertainty or risk, etc. Many situations do not have clear outcomes associated with each decision option. Often there are time constraints and this limits a full consideration of alternatives. There are also cognitive limits to what a decision maker can reasonably consider in the decision process.