BUAD309 Lecture Notes - Lecture 8: Bounded Rationality, Decision Rule, Satisficing
6 Jan 2018
School
Department
Course
Professor
Document Summary
Decision making: the process of choosing one alternative from among several. Problem solving: a special form of decision making that requires developing and evaluating alternatives to find the answer to a question. Programmed decision: recurs often enough for a decision rule to be developed. Decision rule: tells decision makers which alternative to choose once they have predetermined information about the decision situation. Nonprogrammed decision: recurs infrequently, and there is no previously established rule. Information ranges across endpoint conditions: condition of certainty, condition of risk, condition of uncertainty. The rational approach: a systematic, step-by-step process for making decisions. Strengths: forces decision in a logical, sequential manner, in depth analysis enables choice on the basis of information rather than emotion or social pressure. Weaknesses: rigid underlying assumptions often unrealistic, information limited by time. The administrative model: assumes decision makers operate with bounded rationality rather than with perfect rationality. Procedures and rules of thumb reduce uncertainty.
