April 21, 2013

Decision analysis techniques

Different types of information needed for different decision and way of analyse it. On the basis of perceptions of the problem and the options available, the decision maker asseses the expected outcomes and the choice of actions is dependent on evaluations in terms of personal objectives. The decision making process is an amalgam of both rational and sociopsychological factors. It is an approach that allows a decision maker to carry out a through and logical evaluation of alternative strategies in order to determine systematically the "best" available strategy in terms of an objective criterion. Accrording to the author this approach is sometimes called prescriptive analysis, whereas the analysis of the socio-psychological factors is called descriptive or behavioural analysis.

Simon's (1959) concept of bounded rationality is a useful meand to think about decision making ans to an extension to bounded rationality. This framework view rarionality as unbounded and bounded. Unbounded rationality involves models that optimize based on Bayesian approaches, while bounded rationality involves models that relect real life decisionss. Recent studies on human judgement and choices have shown that the prescriptive models are unable to acount for how prople actually make decisions. As most people violate the prescriptive principles because decision making is behavioural in nature.

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