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What is decision making?
It is the selection of a course of action from amongst a set of alternatives.
Types of Decision Making
There are two types of decisions: Rational Decisions & Irrational Decisions
Rational Decision Making
Rational decisions are those decisions which are made by logical thought processes.
Limited / Bounded Rationality
Making a rational decision that can be considered as good under certain limiting factors.
Making a decision that is satisfactory or good enough under the given circumstances.
Making up and Choosing a third option when presented with only 2 options.
Evaluation of Alternatives:
Point of ultimate decision making.
Methods of Evaluating Alternatives
Two methods: Marginal Analysis: Comparing additional revenues to additional cost. Cost Effective Analysis: Least costly way of accomplishing an objective.
Selecting An Alternative
Three approaches: Experience Experimentation Research and Analysis
Something that stands in your way of accomplishing a desired objective.
Principle of Limiting Factor:
By recognizing and overcoming those factors that stand in the way of a goal, the best alternative course of action can be selected.
Types of Limiting Factors
Two types: Quantitative & Qualitative
Programmed and Non-programmed Decisions
Programmed decisions are those that involve structured or routine problems. Non-programmed decisions are those involving unstructured, new and ill-defined situations of a non-recurring nature.
Decision Making Under Certainty, Uncertainty and Risk
All decisions made involve some amount of uncertainty. In a decision involving certainty people are fairly sure about the outcome of a decision. In a situation involving uncertainty people are unsure about the data and the outcome of the decision. In a risk situation, people have data or are aware that the outcome of the situation may go either way,
Creativity and Intuition
The ability to develop new ideas is creativity. Intuition is the application or use of these new ideas.
Group thinking. Getting together and creating new ideas.