Managerial Decision-Making

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ManagerialDecision-Making

1.Explain the concept of the expected-value decision rule. In yourdiscussion, review how the expected-value decision rule played a partin a recent decision you made

Theconcept of the expected-value decision rule is primarily centered onthe determination of an individual that a particular situation oraction might result in the expected outcome. According to theexpected utility theory, each and every level of any given outcomehas a positive correlation with an anticipated degree of net benefitor pleasure. This expectation is commonly known as a utility(Bazerman &amp Moore, 2009). Similarly, expected value is alsosomewhat a gamble or a risky venture. In this case, there is noassurance of success. However, if an individual decides to take upthe decision and accept all the risks associated with it, he/ she hashigh chances of reaping significant benefits. Equally, the move mightresult in losses.

Therefore,it is crucial for an individual or a group of people to establish theexpected value prior to making any decision. This is essential ingiving them a guideline on the best path to pursue so that they canachieve the expected results or outcome. Notably, some choices willpay off and others may not be effective to produce what is expected(Heijne &amp Sanfey, 2015).For instance, the concept played a substantial role in changing mycharacter of being a spendthrift and subsequently running into debts.In accomplishing the same, I decided to embrace the habit of stickingto my budget, purchasing what is necessary and saving as much as Ican. That will enable me improve my current financial situation andmake better decisions about my future. Also, I will be able to avoidthe costly burden associated with debts in terms of interest rates,penalties or fines.

2.Framing and how it affects decision-making process

Basically,framing refers to a scenario where specific areas of a givensituation are evaluated, explored and then incorporated into thefinal decision (Xiaobo,et al, 2015).Framing is crucial in decision-making process since it provides abasis for making choices or arriving at the most suitableresolutions. Equally important, framing allows individuals to carryout a comprehensive analysis of the issues, options as well as theavailable information which will positively contribute to moreappropriate and effective decisions. The process helps in addressingall the questions pertaining to the choices yet to be implemented. Itis also important to note that framing is vital in preventing hastydecisions based on past assumptions. This might subsequently affectthe probability of success because the strategies of attaining thedesired outcomes are not fully examined. Besides, framing assistsindividuals avoid biasness by evaluating concrete data. On the samenote, the procedure helps individuals identify possible pitfalls,determine qualified personnel and develop suitable timelines (XIAOBOet al, 2015).

3. Describe the concepts of joint and separate preference reversals.Also, discuss the similarities and differences that exist between thetwo.

Theconcepts of joint and separate preference fundamentally refers to thetypes of evaluations that an individual performs based on informationprovided to evaluate situations (Bohnet, Van Geen &amp Bazerman,2015). Also, the ideologies can be grounded on items for estimatedvalue with reference to the conditions immediately at hand. Jointevaluations compare more than one option item or the situationpresented and evaluates those choices to determine the best value forthe money. Separate evaluations use the same relative concept, forinstance, instead of comparing two or more objects or circumstanceseach respective situation is evaluated on its own merit and a valueassigned. A major difference is that joint evaluation allows a personto see the choices and make a more informed decision. The separateevaluation leaves those choices out and compels an individual to makea decision based on limited or incomplete information. As a result,many times, an evaluation done prior in the separate evaluation modewill ultimately lead to the individual reversing their decision toselect another choice, if presented through joint evaluation. Thejoint and separate evaluation can also be used separate or inconjunction with one another to achieve the final decision. Differentattributes of the item being evaluated will determine the weight andhow the item fares in a decision (Bohnet et al 2015).

References

Bazerman,M. H., &amp Moore, D. A. (2009). Judgmentin managerial decision making

(7thed.). Hoboken, NJ: Wiley.

Bohnet,I., Van Geen, A., &amp Bazerman, M. (2015). When Performance TrumpsGender Bias: Joint vs. Separate Evaluation.&nbspManagementScience,62(5),1225-1234.

Heijne,A., &amp Sanfey, A. G. (2015). How Social and Nonsocial ContextAffects Stay/Leave Decision-Making: The Influence of Actual andExpected Rewards. PlosONE,10(8),1-21. doi:10.1371/journal.pone.0135226

Xiaobo,Y., Hongning, Z., Xiaodong, Y., &amp Juli, Z. (2015). Impact ofself-framing on decision making: timing matters. Socialbehavior &amp personality: an international journal,43(4),629-639. Doi:10.2224/sbp.2015.43.4.629

Managerial Decision Making

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ManagerialDecision Making

UniversityAffiliation

Discussbounded rationality. In your discussion, explain the term as well asits importance in rational managerial decision-making.

Boundedrationality derives its basis from political scientist Herbert Simon(Fiori,n.d.).The concept was derived as a means of helping managers in theireffort to make a decision within the organization. Simon believesthat the process of making decisions is influenced by non-rationalfactors, which include prejudices, emotions and other kinds ofsubjective biases. The procedure of making decisions especially thoseof business nature requires certain characteristics on the part ofthe policy-makers. They should be adaptive and goal oriented innature. However, with all the needed features, there are thosecritical decisions that they fail to make or even achieve. These arecontributed by the human cognitive and expressive manner. When thisoccurs, it often leads to inequality between the environment in whichthe decision is made and the choices by the policy makers.

Accordingto Fiori(n.d.), bondedreality primarily relies on human behavior particularly thelimitations in the achievement of goals. This means that thisapproach does not make an assumption regarding the decisions made anddoes not use a mathematical approach in making decisions. Bondedreality explores the limitations of incomplete information aboutalternatives and cognitive processing as issues that prevent decisionmakers from achieving their targets. It is important in rationalmanagerial decision making because, it enables managers to adopt aheuristic approach in means of solving problems in a businesssetting. Managers can come up with an appropriate decision though itmay not be an ultimate decision (Fiori,n.d).

Discusshow bias has blocked your ability to make a rational decision. Inyour answer, discuss the heuristic that you may have used and thebias associated with that heuristic. What could you have done toovercome the bias generated by the heuristic?

Rationaldecision formulation entails the use of analysis, facts and step bystep procedure to reach a decision (DeMartino et al , 2006).Bias is one of the factors that influence the process of rationaldecision making. Judgment and decisions are made each day inbusiness. Heuristic has made the process of decision making easierthrough the application of efficient thinking techniques. Anindividual does not have to spend a lot of time analyzing andresearching on the best approach to deal with a situation (DeMartino et al., 2006).Heuristic is a form of mental shortcut in quick analysis ofinformation. Although it can be of essential help to an individual,it often leads to judgmental errors. Sometimes you can find anintelligent person making a dumb decision because of heuristicapproach.

Imay have used availability heuristic in the past when confrontingsome situations. The bias associated with this kind of heuristic isthat we tend to make decisions based on how we perceive an event inour mind. There is an over-reliance on the present and past events,especially when making a decision (DeMartino et al., 2006).Any readily available information in our mind acts as a basis of anevent, and we tend to be cautious of the similar situation. In orderto overcome the bias generated by availability heuristic, we shouldresearch on the subject matter and avoid dwelling on assumptionsbased on past events.

Discussthe concept of satisficing. In your answer, discuss the positive andnegative aspects of applying satisficing in decision-making

Managersconsider the process of decision-making as a vital virtue in acompany. However, there are times when a corporation faces a problem,and there are several alternatives for addressing it. These mean thatthe manager would have to look for the best possible option if he/shewants to decrease efforts, time and cost of decision making. The actof the manager taking a decision that is good enough to address thesituation is referred to as satisficing (ZHU&amp XIE, 2013).The positive aspect of applying satisficing in decision making isthat it reduces the various risks that are involved in comparingalternatives.

Additionally,satisficing justifies optimization in that the chosen optionaddresses the issue at hand without spending more resources inlooking for alternatives. It is also beneficial in cases where we donot have the required information needed for the evaluation ofoutcomes (ZHUet al., 2013). The negative aspect of applying satisficing in decision making isthat at times it may be easy to find a solution to a problem.However, the decision taken may complicate future events in case itwas not set high enough. It requires a decision maker to consider abigger perspective and make a long term decision to the problem (ZHUet al., 2013).

Explainthe availability, representativeness, and affect heuristics. In youranswer, compare the three and discuss the positive and negativeaspects of each.

Gigerrenzer&amp Gaissmaie (2011) defines availabilityheuristic as making of decision-based on likelihood or frequency ofoccurrence. There is too much reliance on events that are readilyavailable in our minds. The advantage of this approach is that it iseasier to make a decision without consulting. Moreover, individualstend to correlate actions that happen close together. The negativeaspect is that it is biased as it depends on information that iseasier to recall (Gigerrenzeret al., 2011).

Representativenessheuristic involves the making of decision-based on the informationcommonly known as mental prototypes. The decisions emanate from whatan individual has been taught such that he/she associates somethingor someone with it (Gigerrenzeret al., 2011).The advantage of this approach is that it saves time and energy sincea fast decision and assumption is made without too much thinking. Thedownside is that it often breeds stereotyping among individuals(Gigerrenzeret al., 2011).Affect heuristic comprises of a situation whereby a person makes adecision based on emotions at the present moment. The emotions may befear, pleasure, and surprise. The positive aspect of this approach isthat decisions are made faster, which saves on time (Gigerrenzeret al., 2011).The negative aspect is that there is over reliance of feelings in theprocess. Hence, it does not reflect a correct judgment on a problemand how it was addressed.

References

DeMartino, B., Kumaran, D., Seymour, B., &amp Dolan, R. J. (2006).Frames, biases, and rational decision-making in the humanbrain.&nbspScience,&nbsp313(5787),684-687.

Fiori,S. Herbert A. Simon and Contemporary Theories of Bounded Rationality.SSRNElectronic Journal.http://dx.doi.org/10.2139/ssrn.1367091

Gigerenzer,G., &amp Gaissmaier, W. (2011). Heuristic decision making.&nbspAnnualreview of psychology,&nbsp62,451-482.

ZHU,D. &amp XIE, X. (2013). Which One Is Better, Maximizing orSatisficing?. AdvancesIn Psychological Science,21(2),309-316. http://dx.doi.org/10.3724/sp.j.1042.2013.00309

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