P. 1
Models of Decision Making

Models of Decision Making


|Views: 6,608|Likes:
Published by avneeshpimr143

More info:

Published by: avneeshpimr143 on May 28, 2009
Copyright:Attribution Non-commercial


Read on Scribd mobile: iPhone, iPad and Android.
download as PPT, PDF, TXT or read online from Scribd
See more
See less





Models of Decision making

Every manager has to take decision and every manager is model of decision making
Mrs.Shubhalaxmi Joshi 1

Models of decision making
The Herbert Simon model The administrative model The classical model

Mrs.Shubhalaxmi Joshi


Administrative Model
Manager is the decision maker to handle the situation Relevant information is collected by him Decision making is certainly in the interest of manager which certainly may not be in the interest of the organization e.g.Expediency ,opportunism
Mrs.Shubhalaxmi Joshi 3

The classical model
Manager plays major role of decision making He collects all the information required for activity Decision would be in the interest of organization.

Mrs.Shubhalaxmi Joshi


Decision making tools
Pay off matrix Decision Tree Decision rules Decision tables

Mrs.Shubhalaxmi Joshi


Pay off Matrix
Essential quantitative technique for decision making It summarizes interaction of various alternative actions and events Pay off matrix is prepared by using probabilities Positive payoff implies profit while negative payoff implies loss
Mrs.Shubhalaxmi Joshi 6

Decision Tree
It is basically extension of probability theory to decision making It helps decision maker to when he has to make sequence of decisions Different alternatives form branches from initial decision point and then moves on to various options emanating from different points is known as decision tree. Initial decision point is known as decision node while different points are 7 Mrs.Shubhalaxmi Joshi

Decision tree….
Decision tree is a means of representing the sequential multistage logic decision problem This is oriented to show decision paths rather than the criteria. It is convenient for showing probabilities for outcomes.
Mrs.Shubhalaxmi Joshi 8

Steps involved in Decision Tree
Build the tree starting fro decision point Add the branches for external states of events Include probability of each state. Assign value of each unique branch. Work backward to analyze the
Mrs.Shubhalaxmi Joshi 9

Standard presentation of Decision tree
Chance node 2nd Decision point

Initial Point
Mrs.Shubhalaxmi Joshi 10

Decision rules

1. Decision rules and tables are used together 2. It enables decision maker to make better decisions and more economically. 4. These rules are used for programmable and routine 2 operating decisions. 2 4. It is imperative that decision rules are documented. .

Mrs.Shubhalaxmi Joshi


Decision Tables
Decision table documents rules that selects one or more actions based on one or more conditions from a set of possible conditions. It is very precise and compact. Decision table includes both qualitative and quantitative bases for decision making I t is in the form of IF…THEN condition He helps the analyst to consider all possible conditions,options and Mrs.Shubhalaxmi Joshi 12

Components of DSS
DSS has three basic components: 2. The database 3. A model Base 4. DSS Software system

Mrs.Shubhalaxmi Joshi


It is collection of current or historical data or files which are internally linked together. It provides easy access for range of applications. DSS extract the data from databases which could be internal or external
Mrs.Shubhalaxmi Joshi 14

Model base
It represents components and relationship of phenomenon A model can be physical, mathematical or a verbal model DSS make use of three basic types of models.

Mrs.Shubhalaxmi Joshi


Model base ……
Decision support system

Management science Behavioural model model

Operation research model

Mrs.Shubhalaxmi Joshi


Behavioural Model
The focus is on studying, understanding and the trends among the variables. Forecasting, correlation, regression these are the basic examples

Mrs.Shubhalaxmi Joshi


Management science model
These models are based upon principles of management, management accounting and Econometrics. Cost accounting system, Inventory management, capital budgeting

Mrs.Shubhalaxmi Joshi


Operation research model
It is application of mathematical formulae arriving at optimum solutions. LPP,ABC ANALYSIS

Mrs.Shubhalaxmi Joshi


You're Reading a Free Preview

/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->