2 Decision Making Models

There are two decision making models. Detail description about this two given below:

Decision Making Models

Classical Model of decision-making

The classical decision model is a prescriptive approach that guides management how it should make decision. It rests on the assumption that managers are logical and rational and that they make decisions that are in the best interest of the organization.

The classical model views the decision-making process: i) Decision makers have complete information about the decision situation and possible alternatives, ii) they can effectively eliminate uncertainty to achieve a decision condition of certainty, iii) They evaluate all aspects of the decision situation logically and rationally.

However, these conditions rarely, if ever, actually exist. This model may be represented in the following diagram:

decision_making_models_1

Administrative Model of Decision-making

Herbert A. Simon was of the first few scholars to recognize that decisions are not always made with rationality and logic. Simon, a winner of Nobel Prize in Economics, instead of prescribing how decisions should be made, describes how decisions often actually are made.

The Administrative model holds that managers: (i) have incomplete and imperfect information, (ii) are constrained by bounded rationality, and (iii) tend to satisfies when making decisions.

decision_making_models_2

As a matter of fact, the classical and administrative models paint quite different pictures of decision making. The classical model is prescriptive: it explains how managers can at least attempt to be more rational and logical in their approach to decisions.

The administrative model can be used by managers to develop a better understanding of their inherent bases and limitation.

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