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CHAPTER SUMMARY – CHAPTER 6 The Decision-Making Process Define decision and decision-making process. Describe the eight steps in the decision-making process. A decision is a choice. The decision-making process consists of eight steps that begin with (1) and (2) identifying a problem and decision criteria and (3) allocating weights to those criteria; move to (4) developing, (5) analyzing, and (6) selecting an alternative that can resolve the problem; (7) implementing the alternative; and concludes with (8) evaluating the decision’s effectiveness. (See Exhibit 6-1.) The Manager as Decision Maker Discuss the assumptions of rational decision making. Describe the concepts of bounded rationality, satisficing, and escalation of commitment. Explain intuitive decision making. Contrast programmed and nonprogrammed decisions. Contrast the three decision-making conditions. Explain maximax, maximin, and minimax decision choice approaches. Describe the four decision-making styles. Discuss the twelve decision-making biases managers may exhibit. Describe how managers can deal with the negative effects of decision errors and biases. Explain the managerial decision-making model. The assumptions of rationality (see Exhibit 6-6) are as follows: the problem is clear and unambiguous; a single, well-defined goal is to be achieved; all alternatives and consequences are known; preferences are clear, constant, and
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This note was uploaded on 02/14/2012 for the course FINANCE & 101 taught by Professor Mrhoang during the Spring '11 term at Shanghai Normal University.

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