COMMERCE 1BA3 Lecture Notes - Lecture 11: Decision-Making, Bounded Rationality, Cognitive Bias
Document Summary
Decision making - process of developing a commitment to some course of action. It involves making a choice among several action alternatives. Decision making can also be described as a process of problem solving. Problem - a perceived gap between an existing state and a desired state. The compleat decision maker a rational decision-making model. A rational decision maker might use a model that involves a sequence of steps that are followed when making a decision. Information overload - reception of more information than is necessary to make effective decisions; can lead to errors, omissions, delays, cutting corners: decision makers seem to think that more is better. Important to be aware of reference point used when framing decision alternatives: framing a problem as choice between losses can contribute to foolish level of risk taking, learning history can modify preferences for or against risk.
