Tocher 1976 and 1978 reprinted in french 1989 and

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Unformatted text preview: search presented in this thesis can be used to answer the three research questions proposed in Chapter 1. The following section will examine how the work produced in this thesis contributes to the existing academic and industry literature. In section 8.4, the implications of the study for practitioners will be investigated. 8.3 THEORETICAL CONTRIBUTION This section will demonstrate how the research presented in this thesis can be seen to have generated a robust set of findings that have contributed to the one of the current debates in the decision theory literature. As indicated in Chapter 2, the decision theory literature is comprised of behavioural decision theory and decision analysis. Simplistically, decision analysis is the label given to a normative, axiomatic approach to decision-making under conditions of risk 189 and uncertainty. By using any one, or a combination, of decision analysis techniques, the decision-maker is provided with an indication of what their decision ought to be based on logical argument. Conversely, the behavioural decision theory literature shows that people are not always coherent or internally consistent. They do make inconsistent patterns of choices and their inferences can be exploited (Clemen, 1999), particularly under conditions of risk and uncertainty. There is a tendency in the decision theory literature for decision analysts and behavioural decision theorists to become embroiled in a somewhat circular argument over the use and benefits of decision analysis. Tocher (1976 and 1978 reprinted in French, 1989) and other behaviouralists argue that people do not behave in the manner suggested by decision analysis and, in particular, do not adhere to the underlying assumptions of the decision analysis approach, namely those of rationality and maximising behaviour. Harrison (1995 p90) writes: “…the assumptions underlying maxisimising behaviour are faulty. Objectives are not fixed. The known set of alternatives is always incomplete because it is impossible to obtain perfect information and human beings cognitive limitations preclude serious consideration of a large number of alternatives. Many of the variables that must be considered in any attempt at maximisation are not easily quantified. Therefore, a precise preference ranking of the firm’s objectives or its alternatives that will maximise outcome is most unlikely.” In a special edition in 1991 of the Harvard Business Review The logic of business decision-making, Etzoni (1991 p41) commented: “Decision-making was never as easy as rationalists would have us think. Psychologists argue compelingly that even before our present troubles began, human minds could not handle the complexities that important decisions entailed. Our brains are too limited. At best, we can focus on eight facts at a time. Our ability to calculate probabilities, especially to combine two or more probabilities – essential for most decision-making – is low… Moreover, we are all prone to let our emotions get in the way – fear for one. Since all decisions entail risks, decision-making almost inevit...
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