Decisions Under Risk and Uncertainty - UP.pptx
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This document discusses decision-making under risk and uncertainty. It defines decision-making as selecting an action from alternatives and outlines an eight step process for decision-making. It distinguishes between risk, where probabilities can be assigned to possible outcomes, and uncertainty, where outcomes cannot be probabilistically defined. When managers lack perfect information, they face risk. Decision-making techniques discussed include risk analysis, decision trees, and preference theory. Key aspects of decision problems are identified as the decision-maker, alternatives, possible events or outcomes, and consequences or payoffs. Payoff matrices are presented as a tool to summarize interactions between alternatives and events. Maximizing the best payoff, minimizing the worst payoff, and minimizing maximum regret are presented
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The document discusses decision making and outlines several key aspects of the decision making process. It discusses factors that influence decision making like scope, uncertainty, and risk. It also describes the main phases of decision making as intelligence, design, and choice/implementation. Finally, it outlines the decision making process as determining objectives, identifying options, collecting information, selecting criteria, evaluating options, choosing a strategy, implementing it, and monitoring results.
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The document discusses decision making in nursing administration. It defines decision making and differentiates it from problem solving. It describes various types of decisions including mechanistic, analytical, judgmental, and adaptive decisions. It also discusses models of decision making such as the descriptive model, bounded rationality model, and normative model. Finally, it outlines steps in the decision making process and factors that influence decision making for nurses.
decision making and decentralization.pptx
The document discusses decision making, including definitions, models, styles, techniques and theories. It provides information on the four stages of group decision making developed by B. Aubrey Fisher. These include the orientation, conflict, emergence and reinforcement stages. Several decision making tools and techniques are also outlined, such as the pros and cons method, SWOT analysis and decision trees. Different decision making theories like the marginal theory, psychological theory and mathematical theory are explained as well.
Software IT risk-management
This document discusses software risk management. It defines risk and explains that risk management consists of risk assessment and risk control. Risk assessment involves identifying risks and evaluating their potential effects, while risk control involves developing and implementing plans to resolve risks. The document outlines different types of software risks like project risks, process risks, and product risks. It emphasizes that software risk management is important given current business conditions and helps avoid problems. Successful risk management requires focusing on people, process, infrastructure, and implementation. The people factor involves participation and training, while the process involves identifying, analyzing, planning, tracking, and resolving risks. Infrastructure establishes organizational support through requirements, resources, and analyzing ROI.
Stu R C8e Ch06
The document outlines learning objectives for a chapter on decision making. It discusses the eight steps in the decision-making process, factors that influence decision making like bounded rationality and intuition. It also describes different types of decisions, biases that can affect decision making, and strategies for effective decision making in complex environments.
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The document outlines the 7 steps of the risk management process:
1. Communicate and consult to identify risks and those involved in managing them.
2. Establish the context by understanding objectives, internal/external factors, and risk criteria.
3. Identify risks through retrospective analysis of past issues and prospective analysis of future threats.
4. Analyze the risks by evaluating their potential consequences and likelihood.
5. Evaluate the risks by prioritizing those that exceed established risk criteria.
6. Treat risks by developing options to reduce negative risks to acceptable levels.
7. Monitor and review risks and treatments to ensure risks remain managed over time.
Decision making process
The document outlines the key steps in the decision making process: 1) Recognizing the problem, 2) Identifying the objective of the decision, 3) Gathering and evaluating relevant data, 4) Listing and evaluating alternative courses of action, 5) Selecting the best alternative, 6) Implementing the decision, and 7) Gathering feedback. It emphasizes that decision making involves tradeoffs between alternatives that are rarely clearly right or wrong. Managers must make decisions despite uncertainty and rely on others while ultimately being responsible. The process described aims to help managers select a desirable course of action to provide solutions to problems.
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Decisions Under Risk and Uncertainty - UP.pptx
- 1. “Everything you gain in life will rock and fall apart, and all that will be left of you is what was in your heart.”
- 2. Decisions Under Risk and Uncertainty Managerial Economics
- 3. Decision-making may be defined as the process of selecting the suitable action from among several alternative courses of action. Managerial Economics The decision making process is constituted from eight steps: 1. Identification of problem 2. Identification of criteria for decision making 3. Distribution of importance / weight of criteria 4. Development of alternatives 5. Analyse of alternatives 6. Selection of alternative 7. Execution of decision 8. Evaluation of effectiveness of decision
- 4. Risk and Uncertainty Managerial Economics Risk refers to a situation in which possible future events can be defined and probabilities assigned. Uncertainty refers to situations in which there is no viable method of assigning probabilities to future random events.
- 5. Decision-making under Risk Managerial Economics Decision-making under Uncertainty When a manager lacks perfect information or whenever an information asymmetry exists, risk arises. Risk is where you are unsure of what can happen, but you know the likelihood of a particular outcome. The decision-maker is not aware of all available alternatives, the risks associated with each, and the consequences of each alternative or their probabilities.
- 6. 2 Managerial Economics • Deductive and it goes by the name a priori measurement • Based on statistical analysis of data and is called a posteriori Concept of Decision-Making Environment
- 7. 2 Priori method-the decision-maker is able to derive probability estimates without carrying out any real world experiment or analysis. Managerial Economics Posteriori measurement of probability is based on the assumption that past is a true representative of the future.
- 8. Modern Approaches to Decision-making under Uncertainty: • Risk analysis-involves quantitative and qualitative risk assessment, risk management and risk communication • Decision trees-involves a graphic representation of alternative courses of action and the possible outcomes and risks associated with each action. • Preference theory-is based on the notion that individual attitudes towards risk vary -Risk averters -Gamblers Managerial Economics
- 10. Characteristics of a Decision Problem 1. A decision-maker 2. Alternative courses of action (strategies) 3. Events or outcomes 4. Consequences or payoffs. Managerial Economics
- 11. Managerial Economics The Payoff Matrix A payoff matrix is an essential tool of decision-making. It is a nice way of summarizing the interactions of various alternative action and events.
- 12. Managerial Economics Alternatives=Decision Alternatives Economic Conditions=State of Nature Profits=Payoffs
- 13. Managerial Economics The best of the bests: 45,70,53 Decision : Invest in Stocks
- 14. Managerial Economics Maximizes the minimum Payoffs (Best of Worst) Best of worst: 5,-13, -5 Decision: Invest in Bonds
- 15. Managerial Economics Minimizes the Maximum Regret Regret is the diffrence between best payoff and actual payoff received Growing economy: best payoff is 70-40= 30(Regret)
- 16. Managerial Economics Maximum 30 18 17 The minimum regret is 17 Decision: Invest in Mutual Funds