This document discusses various aspects of decision theory including models of decision making, decision trees, decision styles, decision theories, group decision making, and improving decision making. It describes the classical, implicit favorite, and intuitive models of decision making. It also outlines four decision styles - directive, analytical, conceptual, and behavioral. Two major decision theories - classical and behavioral - are explained along with their key aspects. Methods for improving individual and group decision making are also provided.

1. Decision Theory
Submitted by:
Laxmi Dotel
BIM 7th semester
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2. Contents
1. Model of Decision Making
2. Decision Tree
3. Decision Styles
4. Decision Theories
5. Group Decision Making
6. Improving Decision Making
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3. Model Of Decision Making
1. Classical model
2. Implicit favorite model
3. Intuitive model
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4. Classical model
 obtain complete and perfect information
 eliminate uncertainty and risk
 evaluate everything rationally and logically
 Decision maker follow following model
1. Investigate the situation
2. Develop Alternatives
3. Evaluate Alternative and select the best one
4. Implement and monitor
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5. Implicit favorite model
 Deals with complex and non routine decisions.
 In this approach, the manager first choose an alternative solution to the
problem and highlights its strength, and compare with other
 This approach can be observed in the purchase of various favorite items in
which a customer gives arguments in favor of his choice on the basis of norms
such as price, quality, appearance, easily availability, after-sales service etc. to
reject other items of same utility
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6. Intuitive model
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 Uses intuitive tools for decision making like experiences, ideas, feelings.
 Applicable only when decision maker are have strong intuitive abilities

7. Decision Tree
 Decision tree is a representation in graphic form of a number of possible future
events that may affect a decision.
 decision tree consist of nodes, branches, probability estimates and payoffs.
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Decision
node
Chance
node
Event 1
Event 2
Event 3

8. Decision Styles
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9. Directive:
Managers using directive style have low tolerance for ambiguity
and are rational in their way of thinking.
They are efficient and logical.
They make fast decisions with minimal information and assessing
few alternatives..
Analytical:
Managers with an analytic style have high tolerance
for ambiguity than do directive type and are rational in their way
of thinking.
They need more information and consider more alternatives.
 long time for decision
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10. Conceptual:
Managers with conceptual style have high tolerance
for ambiguity and an intuitive way of thinking.
They tend to be very broad to their outlook and consider many
alternatives.
They are at finding creative solutions to problems.
Behavioral:
Managers with behavioral style have low tolerance
for ambiguity and an intuitive way of thinking.
They work well with others. They are receptive to suggestions from
others.
Short term decision
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11. Decision Theories
1.Classical decision theory(economic man model):
 Classical view assumes that decision making is based on rational process and
always follows the sequence of steps for decision making.
 It describes how decisions should be made rather than how decisions are
actually made.
 Assumptions:
-Problem is clear and unambiguous.
-All alternatives and consequences are known.
-No time or cost constraints exists.
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12. 2.Behavioral theory(administrative Man model):
• Developed By Herbert Simon
•Based on administrative model i.e. how decisions are made
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13. • The two main component of this theory are:
i. Bounded Rationality:
Decision maker is limited in their Rationality because of different factors such
as:
Attitude
Ability
Education
Benefits
Skills
Habits
ii. Satisfying:
•Decision maker become rational but within the limits of managers' ability and
availability of information.
• Managers make decisions based on alternatives that are satisfactory.
The examples of satisfying decisions are fair price, reasonable profit, adequate
market share, proper quality products etc.
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14. Group
Group is a collection of two or more people who work with one another
regularly to achieve common goal.
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15. Group Decision Making
 Group decision making is process of choosing the
best alternative from the number of available
alternatives through the discussion and analysis by
the group of people.
• Advantages:
• Provides more information, ideas and solutions. (Diversity of experiences
and perspectives.)
•shared responsibility
•builds team feelings
• Generates more alternatives
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16. Disadvantages:
 Time consuming
 Domination of the powerful persons
 Ambiguous(unclear) responsibility
 conflict
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17. Improving individual decision making
 Some people follow rational decision making model whereas some follow non
routine model.
 Individual look for solution that satisfy rather than biasness, prejudices in
decision process.
 Consideration while making decision:
i. Analyze the situation
ii. Be aware of biases
iii. Don’t assume your decision style is appropriate for every job
iv. Try to enhance creativity
v. Change personal negative habits
vi. Calculate risk and return
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18. Improving group decision making
-Brainstorming
-Nominal Group Technique (NGT)
-Delphi Technique
- Electronic Meeting
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19. Brainstorming
 This method uses a group of people usually from five to ten.
 Ideas are generated for specific problem through group creativity.
 Evaluation and ranking of ideas is not allowed in this method.
 This technique is used in advertising and some other fields.
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20. Nominal Group Techniques
 It is the structure technique used to generate the creative and innovative ideas.
 That idea will be accepted which holds the highest rank.
 The group meets face-to-face
 Each member presents one idea to the group
 Discussion and ranking is done
 High ranked idea is used for decision making
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21. Delphi Techniques
 A Delphi technique is the modification of NGT
 Each individual member independently writes down comments, suggestions
and solution
 All the comments are sent to a central location, where they are compiled
 Finally decisions are made in written form through consensus
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22. Electronic Meeting
 Electronic Meeting is one of the techniques that combine the NGT with
sophisticated computer technology.
 up to 5o people sit around a table that is empty except for a series of computer
terminals.
 The issues are presented to the participants who type their response on to their
computer screens.
 The individual comments as well as aggregate votes are displayed on a
projection screen in the room.
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23. References
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• http://en.wikipedia.org/wiki/Decision-making
• http://www.time-management-guide.com/decision-making-skills.html
• http://www.decision-making-solutions.com/decision-making-
theories.html

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