There are several models of decision making that have been proposed by researchers over the years. These models can be broadly classified into two categories: normative models and descriptive models.
Normative
models: Normative models are prescriptive in nature and focus on how decisions
should be made, rather than how they are actually made. These models assume
that decision makers are rational and that they have complete information about
the decision problem. Some of the popular normative models are:
Discuss the various
models of Decision Making
Expected
Utility Theory: This theory assumes that decision makers are rational and that
they can assign probabilities to the possible outcomes of a decision. The
decision maker then chooses the option that has the highest expected utility,
which is calculated as the sum of the utilities of the outcomes weighted by
their respective probabilities.
Decision Tree
Analysis: This technique is used to analyze decisions that involve multiple
stages or alternatives. It involves constructing a tree-like diagram that represents
the decision problem, and then calculating the expected value of each
alternative.
Descriptive
models: Descriptive models are based on how decisions are actually made, rather
than how they should be made. These models recognize that decision makers may
not always be rational, and may not have complete information about the
decision problem. Some of the popular descriptive models are:
Prospect
Theory: This theory proposes that decision makers evaluate outcomes relative to
a reference point, such as their current situation. They are more sensitive to
losses than to gains, and are risk-averse when facing gains but risk-seeking
when facing losses.
Bounded
Rationality: This concept proposes that decision makers are limited by their
cognitive abilities and the information available to them. They may use
heuristics or rules of thumb to simplify the decision process, rather than
calculating expected values.
Intuition: This
model proposes that decision makers rely on their intuition or gut feeling to
make decisions. This approach is often used when the decision problem is
complex or the decision maker lacks information.
Overall, each
model has its own strengths and weaknesses, and the most appropriate model to
use depends on the specific decision problem and the decision maker's
preferences and cognitive abilities.
Rational
Decision Making Model: This model assumes that decision makers have complete
information, are able to identify all possible alternatives, and choose the
alternative that maximizes their expected utility or outcome. It typically
involves several stages, including problem identification, gathering
information, evaluating alternatives, making a choice, and implementing the
decision.
Bounded
Rationality Model: This model recognizes that decision makers are often
constrained by time, information, and cognitive limitations. Therefore, they
use heuristics or shortcuts to make decisions that are "good enough"
rather than optimal. This model is based on the work of Herbert Simon, who
argued that people have "bounded rationality" due to their limited
cognitive abilities.
Intuition
Model: This model proposes that decision makers rely on their intuition or gut
feeling to make decisions. This approach is often used when the decision
problem is complex or the decision maker lacks information. It is based on the
idea that people have a wealth of tacit knowledge and experience that they can
draw on to make intuitive judgments.
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Political
Model: This model recognizes that decision making is often a political process
that involves multiple stakeholders with competing interests. In this model,
decision makers negotiate and compromise to reach a decision that is acceptable
to all parties. It is based on the idea that decisions are made through a
process of bargaining and power struggles.
Incremental
Model: This model proposes that decisions are made gradually over time, as
decision makers gather information and feedback from previous decisions. It is
based on the idea that decisions are rarely made in isolation and that they
build on previous decisions and experiences.
Overall, each
model has its own strengths and weaknesses, and the most appropriate model to
use depends on the specific decision problem and the decision maker's
preferences and cognitive abilities.