Individual Decision-Making Model

A rational decision implies that a qualitative and considered thought process was undertaken in order to reach an optimal outcome. Although there are defined rules that add structure to the rational decision making process (Tripathi & PNP 2007; Williams, & McWilliams 2013), according to contingency theory and with respect to the rationality paradigm, there are limits to which an optimal outcome is realised (Morgan 1986, p. 167; Schoonhoven 1981, p. 352). External factors such as government, customers, competitors and suppliers all impose their constraints that influence the final decision. Contingency theory suggests that the final decision is ultimately determined by the organisation’s overall objectives coupled with real world limitations, and consequently all rational decisions take the form of bounded rationality and therefore should be considered suboptimal (Todd & Gigerenzer 2003, p. 144; March & Simon 1958, p. 269). However, there is another view that considers rational decisions made independently and unbounded will become optimal, or more accurately stated, maximising the expected utility (Von Neumann & Morgenstern 1944).

For the most part, our decision-making processes are either sub-conscious or made fairly quickly due to the nature of the decision before us. Most of us don't spend much time deciding what to have for lunch, what to wear, or what to watch on television. For other, more complex decisions, we need to spend more time and analyze the elements of the decision and potential consequences. To assist with this, many people employ the use of a decision-making model. Utilizing a

My example of the rational choice theory of today is the mexican drug controls of December 2011. The drug trafficking organization in Mexico was highly rational, self-interested actors seeked to maximize profit.

Perception: a process by which individuals organize and interpret their sensory impressions in order to give meaning to their environment.

Rational choice theory holds that people make

This week’s reading Predictably Irrational was very valuable, and informative. While coming up with so many ways of thinking when it comes to behavior, I had no idea even existed. We talked last week about being rational, but this week and this week’s reading it discussed more about irrational, and predictable behavior. At the end of this summary I hope to have showed and understand the difference when it comes to irrational and predictable theories that can disrupt behavior, and decision making.

Economists have often modelled human decision makers as completely rational. According to this model, rational people know their own preferences, gather and accurately process all relevant information, and then make rational choices that advance their own interests. However, Herbert Simon won a Nobel Prize in economics by pointing out that people are rational, but only boundedly so in that they seldom gather all available information, they often do not accurately process the information

Rational decision making Rational decision making provides a structured and sequenced approach to decision making (Bazerman and Moore, 2013). Using such an approach can help to ensure discipline and consistency is built into decision making process. As the word rational suggests, this approach brings logic and order to decision making, comprising a set of steps which include generating multiple options as part of the process (Fig 2). It is thought to be the ideal way to make the correct decision, however this is difficult to achieve in real

Examples of a rational decision is when decide to clear my own bedroom. This is rational decison because I got the benefit from it such as my room look better.

Someone can think and make decisions in two different ways. They can subconsciously make decisions, like what toothbrush to use, or they can put thought behind a decision and then decide. The subconscious decision making is system one and the conscious is system two. By putting thought into the decision the person has to weigh pros and cons for possible outcomes. If I take the back roads to work to bypass the tolls will I be late to work? The decision maker needs to decide what is best. How late do they think they will be, by deciding to take the back roads? How much will the tolls cost? Could you possibly be stuck behind a school bus, or at lights if you take a back road? By weighing the options people can make decisions, but there might be factors, which sway the final choice.

The importance of decision making in individual daily life and in organization level was demonstrated by two scientists, Arkes and Hammond (1992), in ‘Judgment and Decision making’ indentified the four types of information which decision maker requires constructing a decision tree.

Inadequate information, data, and knowledge. For rational decision-making to be accurate, reliable, and complete, information about various aspects of the problem under investigation is necessary. Possible future trends can be estimated with the help of such information. This facilitates rational decision-making. However, adequate and reliable information may not be available at the time of decision-making. As a result, the decisions may become defective or irrational or may prove faulty in the course of time. This is how decisions become irrational.

Simon presented the bounded rationality as a result of human and organization constraints. He sees that the managers would not achieve the requirements of rational behavior. He observed that different types of decisions can be processed in different ways, namely: programmed decisions and non-programmed decisions. The programmed decisions category included decisions that occur frequently. Managers are used to these types of decisions and they already have developed some kind of protocols and procedures for making them. These decisions usually are left for the lower posts in the organizational hierarchy.

Effective decision-making is very important on how probability can be applied therefore effective decision-making must be rational. As mentioned before, people who are deciding rationally are attempting to reach goals in a systematic way. They make sure

Parker’s budgeting decision is a good example of an individual acting with bounded rationality. This term was introduced by Simon in 1957 (as cited in Tolbert & Hall, 2008) to argue that normative models of decision making, which assume fully rational and objective judgement (Teale, Dispenza, Flynn & Currie, 2003), are unrealistic because human rationality is limited. Parker’s judgement may have seemed rational to him, but it was not rational for the organisation, a subtle distinction about rationality made by Storing (as cited in Tolbert & Hall, 2008). Parker’s judgement was also not rational in that he did not have all available knowledge and awareness of risk, which are the conditions of normative models (Teale et al, 2003) and the “official theory” of management (Anthony, as cited in Teale et al, 2003, p. 14). For example, Parker did not know about the variations in the terrain when he made his decision, and he also assumed that the assistant workers could work at the same physical rate that he could. Both of these limitations were factors resulting in a risk to on-time task completion.