Scientific Decision Making

Learning about how scientific decision making effects a business

What are the two approaches to decision making discussed in the lecture?

Scientific data and past experiences.

What is one advantage of scientific decision making?

It reduces the risk of making mistakes as decisions are based on data.

What is a disadvantage of scientific decision making?

It can be time-consuming to collect the necessary data.

What factors influence a manager's decision making?

Availability and reliability of data, manager’s experience, and the risk the business is willing to accept.

What tool can managers use in scientific decision making to compare outcomes?

A decision tree.

How is the estimated value (EV) for a decision calculated using a decision tree?

By multiplying the probability of each outcome with the value of the outcome.

In option 1 of the example, what is the EV based on the given pay-offs and probabilities?

£13,000.

In option 2 of the example, what is the EV based on the given pay-offs and probabilities?

£13,400.

What is the conclusion drawn from comparing the estimated values of option 1 and option 2?

Option 2 is probably the best course of action based on the data.

Why might inexperienced managers lean towards scientific decision making?

Because they have no prior experience or expertise to rely on.