Exam 4: Foundations of Decision Making

Application of the Decision- Making Process Net income has fallen for the second quarter, and Amanda is understandably worried. She knows at the board of directors meeting on Wednesday she will be closely questioned and expected to have a plan to avoid any third- quarter losses. Amanda begins to read slowly over the financial documents to try and ascertain areas that may be the cause. After much consideration, it appears that expenses have risen dramatically over the last few months. Amanda wonders why. She decides a meeting of the department heads is in order first thing tomorrow morning. At the meeting, Amanda would like to generate several possible solutions to the increased expenses. She wonders how to effectively explore all the options. At the meeting, the first option that is discussed is to downsize the research and development department since it is not essential to current operations. Several managers approve this plan. Amanda suggests that they need to look further at the issue. Several suggestions are made, many of which appear to be viable. Amanda wonders what to do next. -What is the first step in the decision- making process facing Amanda?

Most individuals make decisions based upon incomplete information.

Programmed decisions minimize the need for managers to

Few people actually behave rationally.

Heuristics or "rules of thumb" improve the accuracy of a decision maker's judgment.

The decision- making model consists of four styles: directive, analytic, behavioral, and _________.

Representative heuristic is the tendency for people to base their judgments on information that is readily available to them.

Groupthink explains why groups make more accurate decisions than individuals.

After all factors have been determined, weights have been assigned, and alternatives have been identified, the next step in decision making is to

The supplier is late with the order of paper that is needed by the college during finals week. The secretary is sent to Wal- Mart to pick up an extra case until the paper arrives. This is an example of a(n)_________problem.

Application of the Decision- Making Process Net income has fallen for the second quarter, and Amanda is understandably worried. She knows at the board of directors meeting on Wednesday she will be closely questioned and expected to have a plan to avoid any third- quarter losses. Amanda begins to read slowly over the financial documents to try and ascertain areas that may be the cause. After much consideration, it appears that expenses have risen dramatically over the last few months. Amanda wonders why. She decides a meeting of the department heads is in order first thing tomorrow morning. At the meeting, Amanda would like to generate several possible solutions to the increased expenses. She wonders how to effectively explore all the options. At the meeting, the first option that is discussed is to downsize the research and development department since it is not essential to current operations. Several managers approve this plan. Amanda suggests that they need to look further at the issue. Several suggestions are made, many of which appear to be viable. Amanda wonders what to do next. -Which of the following would help Amanda develop a thorough list of alternative solutions to the problem?

Application of Decision Making: A Contingency Approach It seems that all Dave accomplishes is making decisions. Every time he turns around, someone wants him to decide on one more thing. Just today the secretary came in and asked if she could reorder paper for the fax machine. Somehow that seemed like a decision he really did not need to deal with. If he could avoid those types of decisions, then when the foreman came in with the news of a major piece of equipment that needs repair, in which the repair bill will be almost as much as a new machine, Dave could focus more time and attention on the more complicated issues. -The problem of whether to repair the piece of equipment or to purchase a new machine is an example of a(n)_________problem.

The fact that managers make consistent, value- maximizing choices within specified constraints is known as which of the following?

Application of Decision Making: A Contingency Approach It seems that all Dave accomplishes is making decisions. Every time he turns around, someone wants him to decide on one more thing. Just today the secretary came in and asked if she could reorder paper for the fax machine. Somehow that seemed like a decision he really did not need to deal with. If he could avoid those types of decisions, then when the foreman came in with the news of a major piece of equipment that needs repair, in which the repair bill will be almost as much as a new machine, Dave could focus more time and attention on the more complicated issues. -The decision as to when to order fax paper could be determined by a

The first step in the decision- making process is which of the following?

In many cases, managers engage in escalation of commitment in order to show that their initial decision was correct even though they did not get the outcome they expected.

When decisions must be made with limited information because decision makers do not have full knowledge and cannot determine even a reasonable probability of alternative outcomes, they must make their decisions under a condition of risk.

Discuss the concepts of bounded rationality and satisficing and how they differ.

Organizational efficiency is facilitated by the use of programmed decision making.

Well- structured problems align closely with the assumptions underlying perfect rationality.