5.

A variety of models and processes have been offered to suggest ideally how people should describe
how they actually make decisions. Some writers discuss rational, bounded rational and intuitive or
value- based models. Describe and discuss the models.

a. Rational Model
This kind of rational decision making model assumes that the decision maker is
knowledgeable or has full or perfect information regarding the alternatives that may be used in
the decision making process. It also assumes that they have time, cognitive ability, and
resources to evaluate each choice against others. This is a logical model arranged
chronologically for choosing between alternatives that follows a path from the problem
identification process down to the solution. This process involves, logic, objectivity, and analysis
over subjectivity and insight.

This model disregards the factors that cannot be quantified, such as ethical concerns. It
leaves out consideration of personal feelings, loyalties, or sense of obligation. This creates bias
towards the preference of facts, data and analysis over intuition or desires.

b. Bounded Rational
This model is defined as the ability and willingness to make a decision by following a
reasoned, unemotional and logical approach in decision making.

Principles of Bounded Rationality (from: https://courses.lumenlearning.com/boundless-

management/chapter/rational-and-nonrational-decision-making/)
1. As no one can make a decision affecting the past, decisions must operate for the future and
the future almost in all cases involves uncertainties or unforeseen events.
2. The capacity of the human mind to perceive, retain and retrieve complete knowledge and
information on past, present and future events is not unlimited. Again, information is
neither readily available nor is it a free commodity. The cost of information collection vis-a-
vis its reliability and relevance is an important consideration.
3. It is difficult to recognize all the alternatives that might be followed to reach a goal, because
of human cognitive constraints. It is neither necessary nor feasible to generate the entire set
of alternatives. The computational capabilities of the decision maker are also limited. In
most cases, not all alternatives can be analyzed, even with the latest analytical techniques
and tools like computers.
4. With all his’ knowledge and intelligence, the average decision maker has his own soft
emotions. He cannot completely shut off his subjective viewpoints from influencing the
decision process.

Because of the limitations mentioned above, a decision maker would rather be more interested
in a choice which is satisfactory and sufficient.
 In other words, a manager must settle for limited rationality or “bounded” rationality.

Since it is not possible for managers to be fully rational in practice, they sometimes compromise
with their dislike of risks—their desire to “play it safe”—to interfere with the desire to reach the
best solution under the circumstances. In here, the decision maker doesn’t utilize the decision-
making approaches as a result of cognitive limitations in the capacity to understand and
overlook an information which may affect the information accessibility.

Figure 1: Bounded Rationality

c. INSERT ALLIAH’S RESEARCH 

REFERENCES:

https://iedunote.com/bounded-rational-decision-making

https://courses.lumenlearning.com/boundless-management/chapter/rational-and-nonrational-decision-
making/

https://www.marketing91.com/bounded-rationality/

http://open.lib.umn.edu/principlesmanagement/chapter/11-3-understanding-decision-making/

https://the-happy-manager.com/articles/rational-decision-making-model/

https://study.com/academy/lesson/bounded-rationality-and-decision-making-in-organizations.html