MGHB02H3 Chapter Notes - Chapter 11.1-11.3: Information Overload, Confirmation Bias, Decision-Making
Chapter Eleven: Decision Making
11.1 Define decision making and differentiate well-structured and ill-structured problems
Decision making: the process of developing commitment to some potential actions (a.k.a. problem
solving)
1. Picking between multiple alternatives
2. There is focus on the process; how to reach the conclusion
3. Commitment involves expenditure of resources (time, money, people)
Problem: exists when there is a different between current state and desired state
Well-Structured Problems: current state, desired state, and how to reach desired state is obvious;
simple, routine and familiar
Program: standardized way of solving a problem (good for well-structured problems), a shortcut that
lets decision maker go directly to the solution without much thought
Rules, routine, procedures, rules of thumb, policy
Ill-Structured Problems: current state, desired state, and how to reach desired state is ambiguous;
unique, complex and not previously encountered
Rational decision-making process
1. Identify problem
2. Search for relevant information
3. Develop alternative solutions
4. Evaluate alternative solutions
5. Choose best solution
6. Implement solution
7. Monitor and evaluate solution
11.2 Compare and contrast perfectly rational decision making with decision making under bounded
rationality
Perfect rationality: decision making that is completely informed, perfectly logical, and oriented towards
economic gain
Bounded rationality: decisions are made with limited information and under constraints (time, politics)
and are subject to biases
Framing: how information is presented or interpreted by the decision maker (assumptions
regarding the problem, reference points of success, the possible outcomes)
Cognitive biases: tendency to interpret information ways that causes errors
11.3 Discuss the impact of framing and cognitive biases on the decision process
Bounded rationality causes errors in problem identification
Perceptual defence (the mind defends from unpleasant perceptions)
Problem defined in terms of functional specialty (selective perception; poor sales due to bad
product design but marketing employee tries to solve with better promotion)
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Document Summary
11. 1 define decision making and differentiate well-structured and ill-structured problems. Decision making: the process of developing commitment to some potential actions (a. k. a. problem solving: picking between multiple alternatives, there is focus on the process; how to reach the conclusion, commitment involves expenditure of resources (time, money, people) Problem: exists when there is a different between current state and desired state. Well-structured problems: current state, desired state, and how to reach desired state is obvious; simple, routine and familiar. Program: standardized way of solving a problem (good for well-structured problems), a shortcut that lets decision maker go directly to the solution without much thought. Ill-structured problems: current state, desired state, and how to reach desired state is ambiguous; unique, complex and not previously encountered. 1: search for relevant information, develop alternative solutions, evaluate alternative solutions, choose best solution. 11. 2 compare and contrast perfectly rational decision making with decision making under bounded rationality.
