MHR 405 Chapter Notes - Chapter 7: Subjective Expected Utility, Decision-Making, Bounded Rationality

• School: Ryerson University
• Department: Human Resources
• Course: MHR 405
• Professor: Franklin Ramsoomair

Document Summary

Mhr chapter 7 decision making and creativity. Decision making the conscious process of making choices among alternatives with the intention of moving towards some desired state of affairs. Effective decision making involves identifying, selecting and applying the best possible alternative. Rational choice paradigm the view in decision making that people should use logic and all available information to choose the alternative with the highest value. The rational choice paradigm selects the choice with the highest utility through the calculation of subjective expected utility (seu) probability of satisfaction resulting from choosing a specific alternative in a decision. Multiply the utility of each outcome together with the probability of that outcome occurring, then add those results across all outcomes to figure out which option has the highest overall subjective expected utility. Key point: all decisions rely to some degree on (a) the expected value of the outcomes (utility) and (b) the probability of those good and bad outcomes occurring (expectancy)