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exam2 - EXAM#2 DECISION-MAKING 1 Is decision-making a...

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EXAM #2 DECISION-MAKING 1. Is decision-making a function of management? - No, it’s a part of all functions -Most closely associated w/ planning 2. Why do we make decisions as managers? - To accomplish goals efficiently 3. What’s the difference b/c programmed & non-programmed decisions? - P -- specific procedures developed 4 repetitive & routine problems; 1 st -line; rule or standard operating procedure used in making the decision; different; complex -N -- specific to mgt problems that are novel (new) & unique [different] and complex (hard to understand; top managers; if you have to think about it 4. Do managers make more programmed or non-programmed decisions, in general? - Programmed makes us more efficient – most things we’ve faced before -top management makes most non-programmed decisions 5. What is decision-making under conditions of certainty? -Managers know all available alternatives & the outcomes associated w/ each; 100% probability that alternative A will lead to outcome 1 6. What is decision-making under conditions of risk? -Lack of certainty regarding outcomes of various alternatives, but an awareness of probabilities associated w/ their occurrence; alternatives are known, but outcomes are in doubt - probabilities of 0-100% 7. What is decision-making under conditions of uncertainty? -Don’t know alternatives, their potential outcomes, or the probability of the outcomes occurrence – NO probabilities 8. Which decision-making condition is most common? Least common? Most difficult? - Most common = risk...probabilities 0-100% -Least common = certainty…100% probabilities -Most difficult = uncertainty…no probabilities -Easiest = certainty If you play the odds well with risk, you will still lose 9. What is the key to making good decisions under risk? - Accurately determining the probabilities associated w/ each alternative 10. How do programmed/non-programmed decisions & the different decision- making conditions relate? - Programmed = certainty & risk -Non-programmed = risk & uncertainty ** Every programmed decision was at one point or another & non-programmed
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decision! 11. What does the traditional economic model assume about decision-makers? (2 assumptions) - Decisions are made under conditions of certainty (a) Managers seek to maximize benefits {or minimize costs} (b) Managers are completely rational -You always select the best alternative -A prescriptive model b/c it’s what you should do ! 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? -Decisions are made under “bounded rationality ” rather than complete… satisficing rather than maximizing -How decisions are actually made 14. What is bounded rationality? What 3 things bound one’s rationality? - You don’t know everything, try but its limited! Risk and uncertainty -Mangers are unable to grasp the full complexity of managerial decisions b/c their rationality is bounded by limited mental capacity (7+/- 2), emotional state , & unforseeability of future events (probabilities are < 100%, less than perfect) 15. What is satisficing? How does it differ from maximizing? Is it irrational?
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