Decision Making Essay

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Decision Making A scientific approach 1 Why study decisions? • Morris (1963, p.11) argues that management science is about making decisions. Specifically; – “… improvement will occur if the methods of science are applied to the decisions which managers must take …” • This is where the ‘money’ is. 2 Decision Making • • • • • Minimax Regret Utility Functions Expected Value Value of Information • All Prescriptive approach. 3 What is a decision? • A decision is the choice of a course of action. • An action has formal meaning, and relates to the term ‘strategy’. It could be to employ candidate ‘A’ for the job. Another action would be to employ candidate ‘B’. 4 Enumerate the Actions … • A decision is only required where there are two or more possible actions. (The lady with one dress does not have to decide which to wear!) • The actions should be ‘specific’, so employ ‘A’ is an action whereas employ ‘someone else’ is insufficient to allow useful analysis. • The first step is to identify the possible actions that are available. Indeed this is where ‘added value’ comes in. 5 Exhaustive and Exclusive • A list is said to be exhaustive where it covers all possibilities. • Items in a list are said to be exclusive where they are such that only one will be amenable to being chosen. • A list is exhaustive and exclusive where all possible actions are covered, and the decision maker has to choose exactly one. 6 Menu Decision • Starter – Garlic Bread – Garlic Mushrooms – Green Salad • Main – Calzone – Pizza – Steak • Sitting in a restaurant with friends, you have to choose what to eat. • Identify a mutually exclusive and exhaustive list of ‘choices’, that is actions, given the menu. 7 Aside … • Thus, the choice of what to eat is the selection from a finite list. • In this case we will ignore the

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