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MANAGEMENT 3200 EXAM TWO OBJECTIVES (FROM THE NOTES & OUTSIDE READING) DECISION-MAKING 1. Is decision-making a function of management? No 2. Why do we make decisions as managers? To accomplish organizational goals more efficiently 3. What’s the difference between programmed and non-programmed decisions? Programmed = rule or standard, developed for routine repetitive problems. Non-programmed = specific solutions for problems that are novel, unique, and unstructured 4. Do managers make more programmed or non- programmed decisions, in general? Programmed 5. What is decision-making under conditions of certainty? Alternatives known Outcomes known 6. What is decision-making under conditions of risk? Alternatives known Outcomes Doubtful 7. What is decision-making under conditions of uncertainty? Type 1) Alternatives Known Outcomes Unknown Type 2) Both Unknown 8. Which decision-making condition is most common? Least common? Most difficult? Risk (most common) Uncertainty (least common) Uncertainty (most difficult) 9. What is the key to making good decisions under risk? Getting probabilities correct 10. How do programmed/non-programmed decisions and the different decision-making conditions relate? Programmed = Certainty 11. What does the traditional economic model 1) Completely Rational
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assume about decision-makers? (2 assumptions) 2) Maximizes 12. Under what decision-making condition do decisions get made in the traditional economic model? Certainty 13. What does the behavioral model assume about decision-makers? 1) Bounded rational 2) Satisfice (choose the pretty good alt.) 14. What is bounded rationality? What three things bound one’s rationality? - Uncertainty where individuals do not examine every possible option available 1) Limited mental capacity 7+-2 2) Emotional state 3) Unforeseen ability of future events 15. What is satisficing? How does it differ from maximizing? Is it irrational? - Seeking or achieving a satisfactory outcome, rather than the best possible - - No, it is rational 16. What is a heuristic? What are the advantages of and disadvantages of heuristics? - Mental shortcut, based on expert experience or common sense rather than an underlying theory. Adv = save time and effort in making decisions (effective and efficient) Dis Adv = unaware of use, misapply and leads to bias 17. What is the availability heuristic? What factors cause you to overestimate the frequency of an event? Underestimate the frequency of an event? - When managers assess the frequency of an event by the degree to which those instances of the event are easily recalled. - Frequent – easy to remember Infrequent – hard to remember - vividness, emotional state, recentness, if its easily imagined 18. What is the representativeness heuristic? What’s the problem with this heuristic?
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This note was uploaded on 04/15/2008 for the course BUSINESS MGT 3200 taught by Professor Sauley during the Spring '08 term at LSU.

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