Scribd
Upload
5 views3 pages

QMM-REPORT

The document discusses the human aspect of decision making, emphasizing the importance of judgment and experience in complex situations. It outlines three classifications of decision making: under uncertainty, certainty, and risk, each defined by the level of information available. Additionally, it introduces decision trees as a visual tool for analyzing potential outcomes and making informed choices based on probabilities.

Uploaded by

sapraveenk29
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
5 views3 pages

QMM-REPORT

The document discusses the human aspect of decision making, emphasizing the importance of judgment and experience in complex situations. It outlines three classifications of decision making: under uncertainty, certainty, and risk, each defined by the level of information available. Additionally, it introduces decision trees as a visual tool for analyzing potential outcomes and making informed choices based on probabilities.

Uploaded by

sapraveenk29
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 3

INTRODUCTION

“If you have made a decision that was entirely based on factual
information, you have not made a decision; it was made for you by the facts.” (Dr.
Elliott Jacques’)
Decision making is a human process; inasmuch as they are made under
conditions of uncertainty, decisions require human judgment. Sometimes, that judgment
can be based upon our “gut feeling” which ideally arises on the basis of learning from
past experience. For most decisions that are simple, this “gut feeling” is adequate.
However, with increasing uncertainty and/or a growing number of independent
variables, decisions become more complex and our intuitive judgments become less
reliable. At that point, we require reliable methods and tools to help us make wiser
choices between alternate courses of action.

DECISION MAKING THEORY


“Decision making is usually defined as a process or sequence of activities
involving stages of problem recognition, search for information, the definition of
alternatives and the selection of an actor of one from two or more alternatives
consistent with the ranked preferences,” this is one of the definitions of decision making.
There are many others as the decision-making process is used in different fields and
each field has its own convenient way of defining it. The epitome of all the definitions is
– Decision making means the adoption and application of rational choice for the
management of the private, business, or governmental organization in an efficient
manner.
CLASSIFICATION OF DECISION MAKING THEORY
1. Decision under uncertainty
2. Decision under certainty
3. Decision under risk
DECISION UNDER UNCERTAINTY
A decision under uncertainty is when there are many unknowns and no
possibility of knowing what could occur in the future to alter the outcome of a
decision. We feel uncertainty about a situation when we can't predict with complete
confidence what the outcomes of our actions will be.

DECISION UNDER CERTAINTY


Decision-making under Certainty: A condition of certainty exists when the
decision-maker knows with reasonable certainty what the alternatives are, what
conditions are associated with each alternative, and the outcome of each alternative.

DECISION UNDER RISK


Decision-making under Risk: When a manager lacks perfect information or
whenever an information asymmetry exists, risk arises. Under a state of risk, the
decision maker has incomplete information about available alternatives but has a good
idea of the probability of outcomes for each alternative.
DECISION TREE
Decision trees combine the concept of Expected Monetary Value with the concept of
joint probability. This approach is useful when the possible outcomes of a decision and
their probabilities are arising in sequence, as a result of risks. In these cases, the joint
probability of two outcomes happening in sequence is the multiple of the probabilities of
each outcome.

 A decision tree is a flowchart that starts with one main idea and then branches
out based on the consequences of your decisions. It’s called a “decision tree”
because the model typically looks like a tree with branches.
 These trees are used for decision tree analysis, which involves visually outlining
the potential outcomes, costs, and consequences of a complex decision.
 You can use a decision tree to calculate the expected value of each outcome
based on the decisions and consequences that led to it. Then, by comparing the
outcomes to one another, you can quickly assess the best course of action. You
can also use a decision tree to solve problems, manage costs, and reveal
opportunities.

You might also like