【正文】 $10,000 expenditure can be framed as a cost or an investment. ? Different decision frames can lead to very different decisions. Copyright 169。 2023 Pearson Canada Inc. Chapter 11 / Slide 14 Bounded Rationality ? Herbert Simon recognized that the rational characteristics of Economic Person do not exist in real decision makers. ? He suggested that managers use bounded rationality. ? Bounded rationality is a decision strategy that relies on limited information and that reflects time constraints and political considerations. Copyright 169。 2023 Pearson Canada Inc. Chapter 11 / Slide 12 Perfect Rationality ? Perfect rationality is a decision strategy that is pletely informed, perfectly logical, and oriented toward economic gain. ? The prototype for perfect rationality is the Economic Person who is the perfect, cool, calculating decision maker. Copyright 169。 2023 Pearson Canada Inc. Chapter 11 / Slide 8 IllStructured Problem ? A problem for which the existing and desired states are unclear and the method of getting to the desired state is unknown. ? Unique and unusual problems that have not been encountered before. ? They tend to be plex and involve a high degree of uncertainty. ? They frequently arouse controversy and conflict. Copyright 169。 2023 Pearson Canada Inc. Chapter 11 / Slide 4 What Is Decision Making? ? Decision making is the process of developing a mitment to some course of action. ? Three things are noteworthy about decision making: – It involves making a choice among several action alternatives. – It is a process. – It involves a mitment of resources. Copyright 169。Chapter 11 / Slide 1 Chapter 11 Decision Making Copyright 169。 2023 Pearson Canada Inc. Chapter 11 / Slide 5 What Is Decision Making? (continued) ? Decision making can also be described as a process of problem solving. ? A problem exists when a gap is perceived between some existing state and some desired state. Copyright 169。 2023 Pearson Canada Inc. Chapter 11 / Slide 9 IllStructured Problem (continued) ? They cannot be solved with programmed decisions. ? Decision makers must resort to nonprogrammed decision making. ? They can entail high risk and stimulate strong political considerations. Copyright 169。 2023 Pearson Canada Inc. Chapter 11 / Slide 13 Perfect Rationality (continued) ? Economic Person characteristics: – can gather information without cost and is pletely informed。 2023 Pearson Canada Inc. Chapter 11 / Slide 15 Bounded Rationality (continued) ? Framing and cognitive biases illustrate the operation of bounded rationality, as does the impact of emotions and mood on decisions. ? Framing refers to the aspects of the presentation of information about a problem that are assumed by decision makers. ? How problems and decision alternatives are framed can have a powerful impact on resulting decisions. Copyright 169。 2023 Pearson Canada Inc. Chapter 11 / Slide 19 Problem Identification and Framing (continued) ? Rational decision makers should be very selfconscious about how they have framed problems. ? They should try out alternative frames. ? They should avoid overarching, universal frames. Copyright 169。 2023 Pearson Canada Inc. Chapter 11 / Slide 23 Alternative Development, Evaluation, and Choice ? The perfectly rational decision maker exhibits maximization – the choice of the decision alternative with the greatest expected value. ? For the decision maker working under bounded rationality, alternative solutions and probabilities of success are not all known. ? Cognitive biases also e into play. ? People are especially weak intuitive statisticians. Copyright 169。 2023 Pearson Canada Inc. Chapter 11 / Slide 27 Satisficing ? Satisficing means that the decision maker establishes an adequate level of acceptability for a solution to a problem and then screens solutions until he or she finds one that exceeds this level. ? When this occurs, evaluation of alternatives ceases, and the solution is chosen for implementation. Copyright 169。 2023 Pearson Canada Inc. Chapter 11 / Slide 31 Solution Evaluation ? The perfectly rational decision maker should be able to evaluate the effectiveness of a decision with calm, objective detachment. ? The bounded decision might encounter problems at this stage of the process: – Justification – Hindsight Copyright 169。 2023 Pearson Canada Inc. Chapter 11 / Slide 35 Escalation of Commitment (continued) ? It can happen even when the current decision maker is not responsible for previous sunk costs and can occur in petitive and nonpetitive situations. ? Groups are more prone than individuals to escalate mitment. Copyright 169。 2023 Pearson Canada Inc. Chapter 11 / Slide 39 Hindsight ? The evaluation of decisions is also inhibited by faulty hindsight. ? Hindsight refers to the tendency to review the decisionmaking process that was used to find what was done right or wrong. ? It often reflects a cognitive bias. ? It is the tendency to assume, after the fact, that we knew all along what the oute of a decision would be. Copyright 169。 2023 Pearson Canada Inc. Chapter 11 / Slide 43 How Emotion and Mood Affect Decision Making (continued) – People in a good mood tend to overestimate the likelihood that good events will occur and underestimate the occurrence of bad events. People in a bad mood do the opposite. – People in a good mood adopt simplified, shortcut decisionmaking strategies, more likely violating the rational model. Copyright 169。 2023 Pearson Canada Inc. Chapter 11 / Slide 47 Perfectly Rational Decision Making Contrasted with Bounded Rationality Copyright 169。 2023 Pearson Canada Inc. Chapter 11 / Slide 51 Why Use Groups?