Models of Managerial Decision Making
Top models of managerial decision-making.
Model # 1. Rational Model/Economic rationality model
The rational model of managerial decision-making has its roots in the economic
theory of the firm.
According to the rational model, managers engage in a decision-making process
which is totally rational. They have all the relevant information needed to take
decisions. They are also aware of different possible alternatives, outcomes and
ramifications, and hence make rational decisions.
This model comes from the classical economist models, in which the decision-
maker is perfectly and completely rational in every way. In this, following
conditions are assumed.
The decision will be completely rational in means ends sense.
There is a complete and consistent system of preferences that allows a choice
among alternatives.
There is a complete awareness of all the possible alternatives
Probability calculations are neither frightening nor mysterious
There are no limits to the complexity of computations that can be performed to
determine the best alternatives
Model # 2. Non-Rational Models:
Unlike the rational view, several non-rational models of managerial decision-
making suggest that it is difficult for managers to make optimal decisions due to
the limitations of information-gathering and processing. Within the non-rational
framework, three major models of decision-making have been identified by
researchers.
These are:
Top models of managerial decision-making.
Model # 1. Rational Model/Economic rationality model
The rational model of managerial decision-making has its roots in the economic
theory of the firm.
According to the rational model, managers engage in a decision-making process
which is totally rational. They have all the relevant information needed to take
decisions. They are also aware of different possible alternatives, outcomes and
ramifications, and hence make rational decisions.
This model comes from the classical economist models, in which the decision-
maker is perfectly and completely rational in every way. In this, following
conditions are assumed.
The decision will be completely rational in means ends sense.
There is a complete and consistent system of preferences that allows a choice
among alternatives.
There is a complete awareness of all the possible alternatives
Probability calculations are neither frightening nor mysterious
There are no limits to the complexity of computations that can be performed to
determine the best alternatives
Model # 2. Non-Rational Models:
Unlike the rational view, several non-rational models of managerial decision-
making suggest that it is difficult for managers to make optimal decisions due to
the limitations of information-gathering and processing. Within the non-rational
framework, three major models of decision-making have been identified by
researchers.
These are:
