Rational Choice Decision Making

  • Rational Choice Decision Making

    • Involves selecting the best option based on expected satisfaction.
    • Composite valence: Calculated by multiplying the valence of outcomes by the probability of each outcome.
    • Higher score indicates a better choice among suppliers.
    • Rational decisions depend on:
    • (a) Probability of each outcome occurring.
    • (b) Valence or expected satisfaction of each outcome.

  • Steps in the Rational Choice Decision Process

    1. Identifying the Problem or Opportunity
    • Problem: A gap between current and desired situations.
    • Goals help evaluate decisions (e.g., answering calls within 30 seconds).
    • Opportunity: Identifying options that could yield better results than current expectations.
    1. Choosing the Best Decision Process
    • Meta-decision about how to decide.
    • Considerations:
      • Involving others in decision-making.
      • Time constraints.
      • Degree of uncertainty in outcomes.
      • Nature of the problem (routine vs. novel).
    1. Identifying Potential Choices
    • Start looking for ready-made solutions.
    • If none exist, develop custom solutions.
    1. Selecting the Best Choice
    • Apply rational choice calculations to find the option with the greatest expected satisfaction.
    1. Implementing the Selected Alternative
    • Assumed to occur with ease in the rational choice model.
    1. Evaluating Outcomes
    • Assess if the gap between "what is" and "what ought to be" has narrowed.
    • Use benchmarks for objective feedback.

  • Problems with Rational Choice Decision Making

    • Assumes full information on alternatives is available, which is often unrealistic.

    • Identifying Problems

    • Solution-Focused Problems: Jumping to solutions without proper understanding.

      • Example: Executive from Apple applying its model untested at JCPenney led to failure.

    • Reasons for Solution Focus Errors:

      • Past success with a certain solution.
      • Desire for closure leading to embedding solutions in problems.

    • Emotions in Decision Making

    • People use emotions as information when making decisions.

    • Intuition plays a role in recognizing problems or opportunities without conscious reasoning.

    • Emotions influence preferences and choices, relating to gut feelings.

  • Enhancing Decision Making

    • Effective decision-making balances intuition with logical analysis.
    • Systematically assess alternatives to minimize biases.
    • Recommendations to improve decisions:
    • Revisit important decisions after allowing initial emotions to settle.
    • Use scenario planning to anticipate future possibilities and prepare alternative actions in a structured way.