Overview of Course Units

Part 1: Part 2: Common Traps of Part 3: JDM Issues in

Decision Analysis Human Irrationality Contemporary
Organizations
Two systems of
Bounded
thinking
awareness

Availability
heuristic Performance
Planning fallacy
appraisal

Defining your Representativeness

Escalation of Diversity and
decision problems heuristic
commitment inclusion

Decisions involving Prospect theory Temporal

multiple objectives Unethical behavior
decision making

Decision making Biases in group

under uncertainty Going green
decision making
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 ABOUT THIS COURSE:
MGMT 3130 Judgment and Decision Making in Organizations

When do we need to make decision?

• We have a goal to achieve.
• We have choices (multiple options).
• We have finite resources which prevent us from pursuing all the options
simultaneously.
When all three above conditions are met, we need to choose the alternative
that best enables us to achieve our goal within the constraints of our
resources.

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What is judgment and decision-making?

Judgment & Decision Making

Judgment of
Value and Choice
Probability

To estimate the value of alternatives To select from alternatives, e.g.,

and the likelihood of events, e.g., • Choose Candidate A or
• How good is this job candidate? Candidate B?
• How likely will this investment be • To invest or not to invest?
profitable?

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 Components of Complex Decision Problems

Objectives
• Your goals. What do you want? What do you need?
Alternatives
• Different courses of action from which you can choose.
Tradeoffs
• In comparing different alternatives, you need to consider the tradeoffs between
the benefits offered by them.
Uncertainties
• The consequences of alternatives may not be certain.
• Associated with this is your risk attitude – would you prefer the least risky
alternative or to tolerate a higher level of risk?
Linked decisions
• Some of the decisions are sequential in nature.
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By now Samuel finds it difficult to think clearly about the decision. What he needs
is a method that will enable him to address the complexity of the problem –
Decision Analysis.
Income Enjoyment Enjoyment
at work from family
? ? ?

Stay with ABC

Consulting Success (?%)
? ? ?
Home office
Set up own Fail (?%)
? ? ?
business
Success (?%)
? ? ?

Rent a Fail (?%)

? ? ?
luxury office
Change job
to XYZ company
? ? ?
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Decision Analysis (DA) involves
(1) the decomposition of a complex decision problem into a set of smaller
elements (objectives, alternatives, tradeoffs, uncertainties),
(2) the systematical thinking about each element, and
(3) the integration of the results so that a provisional best alternative can be
selected.
Benefits of performing DA
• Provide structure to a complex problem – You need to spell out clearly the
objectives, alternatives, tradeoffs, and uncertainties.
• DA shows you what you should do given the judgments that have been elicited
from you during the analysis.
• Provide a defensible rationale for choosing a particular option by tracing back
through the analysis.
• If the solution suggested by DA is inconsistent with your intuitive feelings, the
conflict can then be explored.
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