MG 401 Exam 1 Study Guide – UAB Questions
and Answers| Latest Update
The rational decision-making model offers a step-by-step approach to making decisions
that maximize outcomes by examining all available alternatives
Six steps:
1) problem or opportunity identification
2) information search and analysis
3) generate alternatives
4) evaluate alternatives
5) make decision
6) develop action plans
Bounded rationality decision makers simplify complex problems to limit the amount of
information processing needed
Prospect theory people choose to take on risk when evaluating potential losses and avoid
risks when evaluating potential gains
The importance of how decisions are framed Framing refers to whether questions are
presented as gains or losses. Decisions may be affected by how options are presented.
, Intuition the essence of intuition or intuitive responses is that they are reached with little
apparent effort, and typically without conscious awareness
Four characteristics comprise intuitions:
1) nonconscious process
2) involving holistic associations
3) that are produced rapidly
4) result in affectively charged judgments
Benefits of intuition - Expedites decision making
- Improves the decision in some way
- Facilitates personal development
- Promotes decisions compatible with company culture
Hindsight bias the tendency for individuals with outcome knowledge (hindsight) to claim
they would have estimated a probability of occurrence for the reported outcome that is higher
than they would have estimated in foresight
Overconfidence an inflated confidence in how accurate a person's knowledge or estimates
are
Escalation of commitment occurs when individuals continue a failing course of action
after receiving feedback that shows it isn't working
and Answers| Latest Update
The rational decision-making model offers a step-by-step approach to making decisions
that maximize outcomes by examining all available alternatives
Six steps:
1) problem or opportunity identification
2) information search and analysis
3) generate alternatives
4) evaluate alternatives
5) make decision
6) develop action plans
Bounded rationality decision makers simplify complex problems to limit the amount of
information processing needed
Prospect theory people choose to take on risk when evaluating potential losses and avoid
risks when evaluating potential gains
The importance of how decisions are framed Framing refers to whether questions are
presented as gains or losses. Decisions may be affected by how options are presented.
, Intuition the essence of intuition or intuitive responses is that they are reached with little
apparent effort, and typically without conscious awareness
Four characteristics comprise intuitions:
1) nonconscious process
2) involving holistic associations
3) that are produced rapidly
4) result in affectively charged judgments
Benefits of intuition - Expedites decision making
- Improves the decision in some way
- Facilitates personal development
- Promotes decisions compatible with company culture
Hindsight bias the tendency for individuals with outcome knowledge (hindsight) to claim
they would have estimated a probability of occurrence for the reported outcome that is higher
than they would have estimated in foresight
Overconfidence an inflated confidence in how accurate a person's knowledge or estimates
are
Escalation of commitment occurs when individuals continue a failing course of action
after receiving feedback that shows it isn't working
