DISTINGUISHING BETWEEN THE RATIONAL-ECONOMIC AND THE
ADMINISTRATIVE MODELS OF DECISION MAKING
Rational-Economic Model
o Model of decision making which assumes
that decisions are perfect and rational in
every way or what we so called perfect
rationality
o Maximization of resources by systematically
searching for the optimum solution to the
problem
o (complete and perfect information to
process it all in an accurate and unbiased
fashion)
o This approach is special as it recognizes all
alternative courses of action and to
accurately and completely evaluate each
one to attempt an optimal decision
o In a normative manner (prescriptive
approach) as the decision makers ought to
behave so to make the best possible
decision
March & Simon’s Administrative Model
o Model of decision making which recognizes
the limits under which most organizational
decision makers must operate or what
referred as bounded rationality
o The numbers of solutions that can be
recognized or implemented is limited by the
capabilities of the decision makers as well as
the available resources of the organization
o This approach only selects a solution that
maybe just good enough although not
optimal such referred as satisfying decisions
o In a descriptive manner (proscriptive
approach) as it explains how people actually
makes decision in an organization