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Decision-Making
Process of choosing a specific course of action to respond to both opportunities & problems
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Decision-Making
Programmed
Recurring opportunities & problems; handled with a routine, repetitive approach, Standard Operating Procedure (SOP). Performance program used
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Decision-Making
Nonprogrammed
Response to new, unique problems or opportunities where information is ambiguous or incomplete. Involve custom made solutions
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Rational Decision-Making Model
- Define problem & establish goals
- Identify criteria
- Allocate weights to criteria
- Develop alternatives
- Evaluate alternatives
- Select best alternatives
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March & Simon's Administrative Model of Decision-Making
Satisficing
We don't make "best" decisions but look & choose "acceptable" responses
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March & Simon's Administrative Model of Decision-Making
Bounded Reality
Limitations of the mind cause us to construct simplified models where we extract essential features & fail to consider all the complexity of the problem/opportunity
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March & Simon's Administrative Model of Decision-Making
Psychological factors, biases, & filters result in making satisfactory, not optimal decisions
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Heuristics & Biases
Heuristics
Rule of thumb that simplify making decisions & may lead to errors & biasis in processing & evaluating information
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Heuristics & Biasis
Overconfidence Bias
Overly confident that we are correct
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Heuristics & Biases
Immediate gratification bias
Make choices that provide quick rewards
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Heuristics & Biases
Anchoring & Adjustment Bias
Make choices based on adjustments from some initial amount
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Heuristics & Biases
Confirmation Bias
Focus on information that reaffirms past choices & discounts information that contradicts past judgments
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Heuristics & Biases
Availability Bias
Decide based on information readily available or easy to remember (vivid, extreme, recent)
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Heuristics & Biases
Risk Aversion
Tendency to prefer a sure thing over a risky outcome
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Heuristics & Biases
Representative Bias
Predict the likelihood of an event based on how it resembles other events
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Heuristics & Biases
Randommness Bias
Believe we can predict the outcome of random events
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Heuristics & Biases
Hindsight Bias
Tendency to believe falsely, after the outcome is known, that we could have accurately predicted
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Heuristics & Biases
Escalation of Commitment
- Stick with a decision & invest additional resources even if there is clear evidence to indicate we are wrong
- - Don't want to admit we are wrong
- - Try to recoup lost resources
- - Take more risks when we try to recoup resources than when we try to generate resources
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Advantages of Gropu Decision-Making
- Greater availability & diversity of skills, knowledge & expertise
- Better memory for information
- Better able to detect errors
- Greater decision acceptance
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Disadvantages of Group Decision-Making
- Takes more time
- Potential for "group think". Cohesive groups strive for agreement at expense of accurately assessing information
- Potential for conflict. Need balance of conformity & conflict
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Disadvantages of Group Decision-Making
Polarization
Groups tend to make more extreme decision (either more risky or conservative)
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Disadvantages of Group Decision-Making
Diffusion of Responsibility
Potential for "social loafiing". (individuals exert less effort when in a group)
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Preventing Group Think
- - Leader urges members to be critical, raise doubts, & readily accept criticism of their own ideas
- - Leader does not share own views until group has considered alternatives
- - Leader encourages members to solicit ideas from people outside the group
- - Assign some member(s) to play deil's advocate
- - Hold second meeting after decision is made & encourage sharing any doubts
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