How does behavioral decision making affect the organization? This paper will discuss the decision making process.

1. INFORMATION SYSTEMS
Behavioral Decision Theory
Alphonzo A. Wright III
Trident University International

2. BEHAVIORAL DECISION THEORY
The behavioral decision theory is concerned with identifying the values, uncertainties and
ther issues relevant in given decision, its rationality and the optimal decision results. The major
problem with the old views of decision making is that it assumes that decision makers have
mental capacities for analysis and evaluation that vastly exceed those actually possessed by
people. The central ideas of behavioral decision theory recognize decision making is often
dominated by non-rational, social, and political processes. Decision makers must actually settle
for something less than an ideal solution. (Higgins, 1991)
Bounded rationally is a notion developed in response to the complexity of most real-
world problems and the impossibility of actually implementing the classical theory approach to
rational decision making. (Trist, 1981) The principal of bounded rationality posits that the
human mind lacks the capacity for formulating and solving complex issues whose solution is
required for objectively rational behavior in the real world, furthermore, bounded rationality
implies decisions will always be based upon an incomplete and considerably short knowledge of
the situation. Decision makers will never be able to produce all possible alternatives and
alternatives will always be evaluated faultily since it is impossible to for see and predict all
outcomes associated with each alternative. Finally, the ultimate decision regarding which
alternative to choose must be based on some criteria other than maximization or optimizing,
since it is impossible to ever determine which alternative is the optimal one. (Arnold, 1986)
Satisficing states if everyone in every organization were completely rational, individuals
and organizations would always make the best possible decision. The problems of organizing

3. and managing organizations effectively would not exsist as a result, however, people are not
always completely rational. Given real-world situations, how can individuals go about
determining which alternative to choose when faced with decisions? Simon (1976) has advised
that the key to understanding how people actually go about simplifying complicated decisions
lies in the concept of satisficing. The benefit of satisficing as a base for decision making is
apparent. (Arnold, 1986) It does not require a decision maker to form a potentially limitless of
alternatives. Secondly, it recognizes the bounded rationality of human beings. Finally, it seems to
provide a realistic description of how people go about making decisions.
The time, effort and expense that must go into the process of producing and evaluating
alternatives, satisficing keeps the decision- making process within manageable bound an stops
the process when an acceptable solution has been identified. The behavioral model is based on
the following presumptions. (Higgins 1991): Objectives are often vague and not agreed upon,
Managers may not recognize that a problem exists, and managers may not go through the
identification process and as a result solve the problem inaccurately. Lastly, decision makers and
problem solvers solve models of their environment.
The models never enclose all the shifting facts or relationships involved in the actual
problem. Furthermore, if and when rationality is applied, it’s applied only to a part of the total
problem. Only a few of the possible alternatives are considered. The decision maker’s
knowledge of the situation is usually limited. As an importance of bounded rationality, few
managers search to generate the best possible alternative. Managers analyze decisions on rules
hastily and frequently that they wouldn’t even evaluate alternatives according to criteria. Past

4. experience is often the basis for making decisions. The decision-making process is enormously
affected by social-relationships, especially in the higher levels of the management. The decision
makers must gain the support of commanding individuals and various associations to assure that
their solutions are chosen and put into action. At last, decisions often occur in small steps. There
are few great leaps, especially in large managements.

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