Decision Making 1 30 15 Lecture 6 What do you need to make decisions Facts good information o Complete unbiased info o Reliable accurate info o Relevant info o Consequences of decisions o Easily understood info o Timely No good information no good decision Perception Attribution Theory whether behavior is externally or internally caused o Distinctiveness whether behavior is consistent across different environments situations High just late to class but not late to anything else external factors Low late to everything internal factor o Consensus whether everyone in the same situation behaves in the same way or not o Consistency whether a person behaves the same way in ONE certain situation ALL the High external factors Low internal factors time or not High late to class all the time internal Low late to class once external Fundamental Attribution Error underestimating external sources and over estimating internal sources and vice versa o Not correctly weighting external vs internal factors Self serving Bias you re responsible for you own successes but not your failures Models of Decision Making The Rational Model o Assumption optimization perfect rationality o Generate possible solutions and pick the best one o Limitations assumes problems are clear assumes objectives are clear assumes everyone agrees on solutions assumes all consequences can be predicted Bounded Rationality o Assumption information overload limited resources o People use heuristics to make decisions o Also assumes satisficing pick solution that is good enough Types of Decisions Programmed Decisions o Know how to make decision repetitive know what you re looking for Solved by looking at standard rules and operations Non programmed o Crisis decisions o Don t know best solutions or way to make decisions o High risk of uncertainty and risk Knowledge Management Works best with concrete problems that a system can be designed to solve Can be too easy to focus on explicit knowledge Tacit knowledge often leading edge of organizational learning o Hard to articulate and pass on Explicit knowledge written down articulated easy to pass on Tacit knowledge may be competitive advantage o Other people don t have it because you can t articulate it hard to copy Might want need to make tacit knowledge explicit Can make it explicit by connecting people Heuristics and Biases Representativeness people think things are more likely to happen depending on actions looks lifestyle Availability if you see it it s more likely to happen Anchoring Risk aversion don t make decision if framed as a loss rather than gain Sunk cost fallacy escalation of commitment