Models of Decision Making Behavior- Rationality in Decision Making

Posted on Nov 12 2021 - 6:21pm by simplinotesadmin

Models of Decision Making Behavior

Rationality in Decision Making

The question of rationality has long engaged the attention of decision theorist. Some of them hold the view that a manager is completely rational in his decisions. Some say that he is completely irrational. Still other say that he exercises limited rationality. These three types of views on decision-making behavior are based on three models of man: economic man, administrative man and social man. Following is the description of these models of decision making.

Decision making models

i. Economic Model

The classical approach to decision making in economics has used the economic man model and is essentially a theory of decision making under conditions of certainty. The economic man is completely rational. Decision making is characterized by the following features under economic man mode.
(a) The decision making is completely rational in the means-ends sense. Economic man always identifies clearly the ends to which he wants to reach and the means which are available for the purpose.
(b) Economic man is rational in that he can order his various preferences according to his hierarchy of values and then actually make his choice so as to maximize some desired value. Normally, this desired value would be equivalent to organizational goal attainment and the task goal of profit in particular if decision making is considered in organizational context.
(c) There is complete awareness of various alternatives and the outcome of each alternative can be identified so that the alternative with the best outcome is chosen. It assumes that there is no limit on the collection of information and its processing.

The economic man theory is closely related to the concept of organsational rationality. It is a normative theory rather than a descriptive theory because it is concerned with what a decision maker should do rather than what he actually does in reaching conclusion. In business context, the concept of economic man model cannot be applied because of two reasons.
i. The complete rationality is not possible because the conditions under which economic man makes decision are seldom available. The complete certain conditions do not really exist.
ii. Even if rationality is possible, it cannot be applied because it amounts to maximization of profit which is not possible because of so many pressures from the environmental forces.

Pages: 1 2

Leave A Response