Rational decision making

Examples of Rational decision making in the following topics:

• Rational Decision Making

  • Rational decision making is a multi-step process, from problem identification through solution, for making logically sound decisions.
  • Rational decision making is a multi-step process for making choices between alternatives.
  • The process of rational decision making favors logic, objectivity, and analysis over subjectivity and insight.
  • The rational model of decision making assumes that people will make choices that maximize benefits and minimize any costs.
  • The rational-decision-making model does not consider factors that cannot be quantified, such as ethical concerns or the value of altruism.

• Non-Rational Decision Making

  • People frequently employ alternative, non-rational techniques in their decision making processes.
  • The rational model of decision making holds that people have complete information and can objectively evaluate alternatives to select the optimal choice.
  • The rationality of individuals is limited, however, by the information they have, the cognitive limitations of their minds, and the finite amount of time they have to make a decision.
  • Emotion is a factor that is typically left out of the rational model; however, it has been shown to have an influential role in the decision-making process.
  • Examine alternative perspectives on decision making, such as that of Herbert Simon and Gerd Gigerenzer, which outline non-rational decision-making factors

• Problems with the Rational Decision-Making Model

  • Critics of rational choice theory—or the rational model of decision-making—claim that this model makes unrealistic and over-simplified assumptions.
  • The more complex a decision, the greater the limits are to making completely rational choices.
  • Simon as a more holistic way of understanding decision-making.
  • Bounded rationality shares the view that decision-making is a fully rational process; however, it adds the condition that people act on the basis of limited information.
  • Summarize the inherent flaws and arguments against the rational model of decision-making within a business context

• Behavioral Economics: Irrational Actions

  • Heuristics: people make decisions based on approximate rules and not strict logic.
  • Market inefficiencies: include the study non-rational decision making and incorrect pricing.
  • Behavioral economics focuses on the study of how and why individuals and institutions make economic decisions .
  • The study of behavioral economics shows both the strengths and weaknesses in decision making tendencies and how the decisions impact economic choices.
  • This graph shows the three stages of rational decision making that was devised by Herbert Simon, a notable economist and scientist.

• Theory of Utility

  • In economics, an individual is "rational" if that individual maximizes utility in their decisions.
  • This should not necessarily be taken to mean that individuals who fail to quantify and measure every decision they make are behaving irrationally.
  • For example one person may prioritize flavor while another person may value making healthy choices more.
  • The rationality assumption gives a basis for modeling human behavior and decision making.
  • When making an economically rational purchasing decision, a consumer must consider all of their personal preferences.

• Sunk Costs

  • The idea of sunk costs is often employed when analyzing business decisions.
  • Once spent, such costs are sunk and should have no effect on future pricing decisions.
  • At that point, they have no rational bearing on further investment decisions.
  • The sum originally paid should not affect any rational future decision-making about the car, regardless of the resale value.
  • It may also be used as shorthand for an error in analysis due to the sunk cost fallacy, irrational decision-making or, most simply, as irrelevant data.

• Cognitive Biases as a Barrier to Decision Making

  • Decision making is inherently a cognitive activity, the result of thinking that may be either rational or irrational (i.e., based on assumptions not supported by evidence).
  • Individual characteristics including personality and experience influence how people make decisions.
  • As such, an individual's predispositions can either be an obstacle or an enabler to the decision-making process.
  • Biases in how we think can be major obstacles in any decision-making process.
  • Biases distort and disrupt objective contemplation of an issue by introducing influences into the decision-making process that are separate from the decision itself.

• Leadership and Decision Making: The Vroom-Yetton-Jago Model

  • The Vroom-Yetton-Jago model is a contingency approach to group decision making that is designed specifically to help leaders select the best approach to making decisions.
  • Followers play no other role in the decision-making process.
  • The followers are involved in the decision, but the leader still makes the decision.
  • In a GII decision, leaders are not at liberty to make a decision on their own.
  • Are there technical or rational grounds for selecting among possible solutions?

• Evidence-Based Decision Making

  • The practice of evidence-based decision making involves using current information to make empirically supported decisions.
  • Evidence-based management entails making decisions and creating organizational practices that are informed by analyzing the best available data.
  • The practice of evidence-based decision making in management (often abbreviated as EBMgt) evolved from medicine and emphasizes a rational, objective, and empirical approach to addressing business issues.
  • The formal processes of EBMgt require managers and other decision makers to be disciplined and organized in their decision-making process.
  • Describe the concept and strategic implications of evidence-based decision making in management (EBMgt)

• Rational Action in Specific Contexts

  • Our basic expression for the elements of action and decision is not merely manipulatable.
  • Since the examples given above, in discussing the basic expression, were all drawn from the realm of ad hoc or retail decision-making, no specific discussion of