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4. Rational Decision Making Problems with the Rational Decision-Making Model Non-Rational Decision Making Rational and Nonrational Decision Making Decision Making > Rational and Nonrational Decision Making Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/management?campaign_content=book_2187_section_51&campaign_term=Management&utm_campaign=powerpoint&utm_ medium=direct&utm_source=boundless

5. Rational decision making favors objective data and a formal process of analysis over subjectivity and intuition. The model of rational decision making assumes that the decision maker has full or perfect information about alternatives; it also assumes they have the time, cognitive ability, and resources to evaluate each choice against the others. This model assumes that people will make choices that will maximize benefits for themselves and minimize any cost. Rational Decision Making Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/management/textbooks/alternative-to-management-a-practical-introduction-6th-angelo-kinicki-brian-williams-0078029546- 9780078029547/decision-making-7/rational-and-nonrational-decision-making-51/rational-decision-making-244- 8376?campaign_content=book_2187_section_51&campaign_term=Management&utm_campaign=powerpoint&utm_medium=direct&utm_source= boundless Rational-decision-making model View on Boundless.com Decision Making > Rational and Nonrational Decision Making

6. Critics of the rational decision-making model say that the model makes unrealistic assumptions, particularly about the amount of information available and an individual's ability to processes this information when making decisions. Bounded rationality is the idea that an individual's ability to act rationally is constrained by the information they have, the cognitive limitations of their minds, and the finite amount of time and resources they have to make a decision. Because decision-makers lack the ability and resources to arrive at optimal solutions, they often seek a satisfactory solution rather than the optimal one. Problems with the Rational Decision-Making Model Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/management/textbooks/alternative-to-management-a-practical-introduction-6th-angelo-kinicki-brian-williams-0078029546- 9780078029547/decision-making-7/rational-and-nonrational-decision-making-51/problems-with-the-rational-decision-making-model-245- 3926?campaign_content=book_2187_section_51&campaign_term=Management&utm_campaign=powerpoint&utm_medium=direct&utm_source= boundless View on Boundless.com Decision Making > Rational and Nonrational Decision Making

7. The rationality of individuals is limited by the information they have, the cognitive limitations of their minds, and the finite amount of time they have to make a decision. Simon defined two cognitive styles: maximizers and satisficers. Maximizers try to make an optimal decision, whereas satisficers simply try to find a solution that is "good enough" for the situation. Some research has shown that simple heuristics frequently lead to better decisions than the theoretically optimal procedure. Emotion appears to aid the decision-making process; decisions often occur in the face of uncertainty about whether one's choices will lead to benefit or harm. Robust Decision Making (RDM) is a particular set of methods and tools that is designed to support decision making under conditions of uncertainty. Non-Rational Decision Making Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/management/textbooks/alternative-to-management-a-practical-introduction-6th-angelo-kinicki-brian-williams-0078029546- 9780078029547/decision-making-7/rational-and-nonrational-decision-making-51/non-rational-decision-making-246- 3927?campaign_content=book_2187_section_51&campaign_term=Management&utm_campaign=powerpoint&utm_medium=direct&utm_source= boundless The Brain's Heuristics for Emotions View on Boundless.com Decision Making > Rational and Nonrational Decision Making

8. Free to share, print, make copies and changes. Get yours at www.boundless.com Appendix

9. Key terms bounded rationality The idea that decision-making is limited by the information available, the decision-maker's cognitive limitations, and the finite amount of time available to make a decision. cognitive The part of mental functions that deals with logic, as opposed to affective functions, which deal with emotion. heuristic An experience-based technique for problem solving, learning, and discovery; examples include using a rule of thumb, an educated guess, an intuitive judgment, or common sense. perfect information A situation in which all data that is relevant to a particular decision is known and available to the decision maker. rational Logically sound; not contradictory or otherwise absurd. Rational choice theory A framework for understanding and often formally modeling social and economic behavior. Rational decision making A logical, multi-step model for choosing between alternatives that follows an orderly path from problem identification through solution. satisficer One who seeks a satisfactory solution rather than an optimal one. Free to share, print, make copies and changes. Get yours at www.boundless.com Decision Making

10. Rational-decision-making model This flowchart illustrates the process of rational decision making. Free to share, print, make copies and changes. Get yours at www.boundless.com Wikipedia. "TE-Systems-RationalPlanningAndDecisionMaking." CC BY-SA 3.0 http://en.wikipedia.org/wiki/File:TE-Systems- RationalPlanningAndDecisionMaking.png View on Boundless.comCC BY-SA 3.0http://en.wikipedia.org/wiki/File:TE-Systems- RationalPlanningAndDecisionMaking.pngView on Boundless.com Decision Making

11. The Brain's Heuristics for Emotions Emotions appear to aid the decision-making process. Free to share, print, make copies and changes. Get yours at www.boundless.com Flickr. "Brain | Flickr - Photo Sharing!." CC BY http://www.flickr.com/photos/greenflames09/100781977/ View on Boundless.comCC BYhttp://www.flickr.com/photos/greenflames09/100781977/View on Boundless.com Decision Making

12. Free to share, print, make copies and changes. Get yours at www.boundless.com Decision Making When utilizing a rational decision-making process, what is the final step in any decision-making situation? A) Take action and implement the decision B) Make the decision C) Learn from and reflect on that decision D) List the pros and cons of alternatives

13. Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Decision Making When utilizing a rational decision-making process, what is the final step in any decision-making situation? A) Take action and implement the decision B) Make the decision C) Learn from and reflect on that decision D) List the pros and cons of alternatives

14. Free to share, print, make copies and changes. Get yours at www.boundless.com Decision Making The central concept in rational decision making could best be defined as maximizing benefits and ________. A) making money B) employing logic C) achieving objectives D) minimizing costs

15. Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Decision Making The central concept in rational decision making could best be defined as maximizing benefits and ________. A) making money B) employing logic C) achieving objectives D) minimizing costs

16. Free to share, print, make copies and changes. Get yours at www.boundless.com Decision Making Which of the following statements is a valid critique of rational choice theory? A) People will rarely choose the acceptable option when they can choose an optimal option. B) People do not like to act predictably, even with perfect information. C) Individual rationality is limited by the ability to conduct analysis. D) All of the above.

17. Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Decision Making Which of the following statements is a valid critique of rational choice theory? A) People will rarely choose the acceptable option when they can choose an optimal option. B) People do not like to act predictably, even with perfect information. C) Individual rationality is limited by the ability to conduct analysis. D) All of the above.

18. Free to share, print, make copies and changes. Get yours at www.boundless.com Decision Making Simon identifies three critical components the 'bound' rationality, or essentially limit an individual's ability to decide rationally. Which of the following is NOT one of his components? A) The available information B) Cognitive limitations C) Finite time to decide D) External influence from other individuals

19. Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Decision Making Simon identifies three critical components the 'bound' rationality, or essentially limit an individual's ability to decide rationally. Which of the following is NOT one of his components? A) The available information B) Cognitive limitations C) Finite time to decide D) External influence from other individuals

20. Free to share, print, make copies and changes. Get yours at www.boundless.com Decision Making Gigerenzer and his colleagues have hypothesized, and provided evidence for, the idea that ________ often lead(s) to stronger decision outcomes than a completely rational and logical approach. A) randomness B) intelligence C) heuristics D) experience

21. Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Decision Making Gigerenzer and his colleagues have hypothesized, and provided evidence for, the idea that ________ often lead(s) to stronger decision outcomes than a completely rational and logical approach. A) randomness B) intelligence C) heuristics D) experience

22. Attribution Wikipedia. "Rational choice theory." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Rational_choice_theoryCC BY-SA 3.0http://en.wikipedia.org/wiki/Rational_choice_theory Wikipedia. "Bounded rationality." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Bounded_rationalityCC BY-SA 3.0http://en.wikipedia.org/wiki/Bounded_rationality Wikipedia. "bounded rationality." CC BY-SA 3.0 http://en.wikipedia.org/wiki/bounded%20rationalityCC BY-SA 3.0http://en.wikipedia.org/wiki/bounded%20rationality Wikipedia. "Rational choice theory." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Rational%20choice%20theoryCC BY-SA 3.0http://en.wikipedia.org/wiki/Rational%20choice%20theory Wiktionary. "satisficer." CC BY-SA 3.0 http://en.wiktionary.org/wiki/satisficerCC BY-SA 3.0http://en.wiktionary.org/wiki/satisficer Wikipedia. "Bounded rationality." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Bounded_rationalityCC BY-SA 3.0http://en.wikipedia.org/wiki/Bounded_rationality Wiktionary. "rational." CC BY-SA 3.0 http://en.wiktionary.org/wiki/rationalCC BY-SA 3.0http://en.wiktionary.org/wiki/rational Wiktionary. "cognitive." CC BY-SA 3.0 http://en.wiktionary.org/wiki/cognitiveCC BY-SA 3.0http://en.wiktionary.org/wiki/cognitive Wikipedia. "heuristic." CC BY-SA 3.0 http://en.wikipedia.org/wiki/heuristicCC BY-SA 3.0http://en.wikipedia.org/wiki/heuristic Wikipedia. "Bounded rationality." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Bounded_rationalityCC BY-SA 3.0http://en.wikipedia.org/wiki/Bounded_rationality Wikipedia. "Robust decision making." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Robust_decision_makingCC BY-SA 3.0http://en.wikipedia.org/wiki/Robust_decision_making Wikipedia. "Decision making." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Decision_makingCC BY-SA 3.0http://en.wikipedia.org/wiki/Decision_making Wikipedia. "Bounded rationality." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Bounded_rationalityCC BY-SA 3.0http://en.wikipedia.org/wiki/Bounded_rationality Wikipedia. "Rational choice theory." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Rational_choice_theoryCC BY-SA 3.0http://en.wikipedia.org/wiki/Rational_choice_theory Wikipedia. "perfect information." CC BY-SA 3.0 http://en.wikipedia.org/wiki/perfect%20informationCC BY-SA 3.0http://en.wikipedia.org/wiki/perfect%20information Wikipedia. "Rational decision making." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Rational%20decision%20makingCC BY-SA 3.0http://en.wikipedia.org/wiki/Rational%20decision%20making Wikipedia. "Rational Decision-Making Model." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Rational_Decision-Making_ModelCC BY-SA 3.0http://en.wikipedia.org/wiki/Rational_Decision-Making_Model Free to share, print, make copies and changes. Get yours at www.boundless.com Decision Making