BUMGT5980: Managerial Decision Making - Bias and Decision Making

This essay critically examines managerial decision-making processes, focusing on the influence of bias, as inspired by Simon's quote on the limitations of human rationality. It delves into three key concepts that contribute to decision-making biases: bias and error, emotions and motivation, and basic problems and consequences. The essay incorporates theoretical frameworks like Rational Choice Theory and Deterrence Theory to analyze how biases impact judgment. It explores the role of bounded rationality, heuristics, and emotional factors, discussing their implications for decision-making. The essay also examines the interplay between rationality and emotion, the consequences of biases, and the importance of simplification in complex decision-making scenarios. The analysis incorporates various academic sources to support its arguments and concludes with a summary of the findings.

Running head: MANAGEMENT
Managerial decision-making
Name of the student:
Name of the university:
Author note:

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Table of contents
Introduction................................................................................................................................2
Discussion..................................................................................................................................2
Decoding Simon’s statement..................................................................................................2
Theoretical considerations.....................................................................................................2
Bias and error.........................................................................................................................3
Emotion and motivation.........................................................................................................4
Basic problems and consequences.........................................................................................5
Conclusion..................................................................................................................................6
References..................................................................................................................................7

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Introduction
Approach towards decision making reflects the management of emotions. In this
process, rationality is an important aspect for solving the critical issues. Logical reasoning is
also needed for assessing the extent to which the performance aligns with the benchmarks
towards objective rationality. The observations of Simon are crucial in this context, which
reflects the ways and means in which the complex problems are solved and the impact it
creates on the human mind (Simon, 1955). This assignment takes into consideration, the
aspects of bias and error, the basic problems and consequences and emotions and cognitions,
which shapes the thinking process towards decision making.
Discussion
Decoding Simon’s statement
According to Simon, the capacity of the human mind towards solving the problems is
meagre as compared to the rationality required for solving the problems in the real word
setting. This is an obvious tendency, which contradicts the aspect of overconfidence, which
produces negative results in terms of accomplishing the goals and objectives. This approach
opposes the essence of objective rationality, which is crucial for achieving relevant
resolutions to the potential issues (Simon, 1955). The important aspects in this context are
biases and heuristics, basic problems and consequences along with emotions and cognition,
which are the components of decision making process.
Theoretical considerations
A better understanding in this regards is achieved through the incorporation of
Rational Choice Theory, which consists of the belief that the performance exposed by the
individuals yields more benefits than the costs. As a matter of specification, rational choices
govern the behavioural approaches towards accomplishing the goals and objectives. On the
contrary, Simon, (1955) highlights the economic theory by stating that ‘being economic is

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being rational’. In this case, knowledge of the surrounding concepts is the criterion for
evaluating the approaches towards solving the crucial issues. Here, theories of planned action
and reasoned behaviour can also be applied for assessing the extent to which rationality is
essential in terms of making the decisions. For this, Halpern and Stern, (2018) makes several
assumptions, which relates to utility value in terms of hierarchy, expenses behind the utility
and ways for maximizing the utility.
Bias and error
One of the topic, which the assignment focuses on is the bias and error, which reflects
the error of judgement or wrong decisions, which can create heavy impact on the thought
processes of the individuals. Based on this aspect, the aspect of ‘ideal type of economic man’
is questioned in terms of the behavioural approaches towards decision making process.
Classical economic theory can be correlated in this context for predicting the rationality in the
behaviour of an individual. The criterion in this case is exemption of the empirical analysis
about the psychological properties including perceptions, thoughts and cognition. As per the
arguments of Calabretta, Gemser and Wijnberg, (2017), limitations in the knowledge, skills
and foresightedness contribute in the accomplishment of the goals and objectives.
Theory construction of great subtlety is valued by the limitations in the number of
persons and the scope and arena of communication. In this context, rational calculations
aggravates the complexities towards upgrading the approaches towards bridging the
weaknesses. Bias and error are correlated with each other. According to the arguments of
Gottlieb, (2019), biases can produce either type 1 or type 2 error. Biases relate with the aspect
of irrationality, which results in wrong decisions. According to the Rational Choice Theory,
limitations of the human mind towards solving the critical issues are ignored. This ignorance
relates with the principles of bounded rationality. As a matter of specification, the principles
of bounded rationality comprises computational capacities of error for assessing the

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feasibility of the solutions in the given context. Herein lays the effectiveness of decision
making tree, which helps in experimenting with the crucial solutions and reaching to the
appropriate solution.
According to Gershman, Horvitz and Tenenbaum, (2015), theory of Games and
Economic behaviour has attracted the extent of choice in the rationality towards behaviour.
Statistical tests help in assessing the rationality in the behavioural approaches towards
undertaking essential decisions. Ignoring the principles of bounded rationality is a means of
seeking an insight into the extent of virtual omnipresence and computational power within
the choices towards undertaking crucial decisions. As per the assumptions of Friedman,
economic and administrative theory is used for scanning the human behaviour towards
undertaking the decisions. The human behaviour is described as ‘intendedly rational’ (Simon,
1955). The aspect of relative difficulty is one of the relevant factors in this context, which
highlights the ethical dilemmas towards taking the decisions.
Taking a cue from the Theory of Games and Economic behaviour, the uncertainties
are presented with the limitations. In this context, mention can be made of two assumptions.
One relates with the uncertainty of the joint probability distribution and the other correlates
with the behaviour, which the other players might expose in the course of the decision-
making. If the assumptions are perceived from the notion of goals, in the first assumption,
goal of maximizing utility is substituted by the goal of maximizing the expected utility. In the
second case, the strategies adopted towards accomplishing the goals is replaced by the
minimax strategy. According to the arguments of Alexander, (2017), neither of these
assumptions simplifies the computational issues encountered by the decision maker. In this
context, the expectations attain a backseat in terms of the dominance exerted by the
satisfactory theory of rational choice.

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Emotion and motivation
In the decision making approaches, rationality is one of a crucial components. The
individuals mostly have choices. Within this, there are also subdivisions regarding controlling
the emotions. Gaining adequate motivation from the seniors and the supervisors is assistance
for the individuals to undertake appropriate decisions. In this context, uncertainty places
‘emotion” on a higher pedestal than rationality. This relates with the doubt, which can be
correlated with the aspect of formulating the estimates regarding the future implications. In
this case, deterrence theory can be correlated. The perceptions and assumptions related to
deterrence and rationality are certainty, celerity, severity and system applications. Bazerman
and Sezer, (2016) is of the view that certainty consists of apprehension, charging and
convicting. Celerity involves the calculation for justice system response. Severity relates to
the level of punishment.
According to the general perceptions, deterrence theory is related with criminal
psychology. Based on these aspects, it can be said that crime is intentional, which relates to
the irrationality, resulting in the error of judgment. In this context, overconfidence is very
much related to the psychology of the criminals, which makes them feel that they cannot get
caught. On the contrary, if the perspective of the police is considered, they expose rationality
towards preparing strategies to get hold of the culprits. It is not the case at all times, as the
police staffs also face error of judgments in setting traps for the criminals. This approach
might relate with bias, which aggravates the complexities in the process of decision-making.
Basic problems and consequences
According to Hafenbrädl et al., (2016), simplification in the choice towards
undertaking decisions projects substitution for the goal of maximizing and the goal of
sacrificing. This substitution is done through the means of bounded rationality. In this case,
alternatives gain an important position in terms of deducing relevant conclusions from the
available facts and assumptions. Zsolnai, (2017) is of the view that substituting the goal of

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maximization with the goal of sacrificing is ‘a good move’. However, Faludi, (2017) assumes
that this substitution is a ‘planned action and reasoned behaviour’ for resolving the
complexities and reaching to the appropriate decisions. Scanning the magnitude of the
computational tasks is assistance in terms of measuring the applicability of the decisions
within the given context.
Evidences lies in the theorems and hypothesis related to the models of rationality.
Mention can be made of the symbolic logics, which is revealed in the psychometrics.
Different tests like logical reasoning, aptitude and personality tests are effective in terms of
gaining familiarity with the self-strengths, abilities and competencies. Following an
integrated structure of frame-discover-analyze-design-implement is beneficial for
achieving positive outcomes in terms of decision-making. As per the assumptions of
Bermúdez, (2018), in the stage of discover, the individuals actually discover that there are
many external influences in the form of emotional, social and psychological, which deviates
the individuals from the identified and the specified goals and objectives. This stage of
discover is actually assistance in terms of excavating the basic issues and their consequences.
Here, Lindblom, (2017) makes mention of the risk assessment, which is a measurement for
the rationality within the approach towards undertaking the crucial decisions.
Conclusion
The discussion started with evaluation of the Simone’s quote regarding the complex
approach towards exposing rational behaviour towards decision making. Theories like
Rational Choice Theory, Deterrence Theory, Theory of planned action and reasoned
behaviour is used for supporting the assumptions about the available facts and assumptions.
Hypothetical parameter is exposed towards the rational choice, maximization and sacrificing.
This hypothesis relates to the act of designing the approach towards undertaking effective
decisions, securing the approach towards decision making. The phase of ‘designing’ relates to

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analysis of the alternatives, which can be implemented. Exposing logical reasoning in this
implementation proves beneficial for resolving the complexities in the decision making
process.

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References
Alexander, E. (2017). After rationality: Towards a contingency theory for planning. In
Explorations in planning theory (pp. 45-64). Routledge.
Bazerman, M. H., & Sezer, O. (2016). Bounded awareness: Implications for ethical decision
making. Organizational Behavior and Human Decision Processes, 136, 95-105.
Bermúdez, J. L. (Ed.). (2018). Self-Control, Decision Theory, and Rationality: New Essays.
Cambridge University Press.
Calabretta, G., Gemser, G., & Wijnberg, N. M. (2017). The interplay between intuition and
rationality in strategic decision making: A paradox perspective. Organization Studies,
38(3-4), 365-401.
Faludi, A. (2017). Rationality, critical rationalism, and planning doctrine. In Explorations in
planning theory (pp. 65-82). Routledge.
Gershman, S. J., Horvitz, E. J., & Tenenbaum, J. B. (2015). Computational rationality: A
converging paradigm for intelligence in brains, minds, and machines. Science,
349(6245), 273-278.
Gottlieb, G. (2019). The logic of choice: An investigation of the concepts of rule and
rationality. Routledge.
Hafenbrädl, S., Waeger, D., Marewski, J. N., & Gigerenzer, G. (2016). Applied decision
making with fast-and-frugal heuristics. Journal of Applied Research in Memory and
Cognition, 5(2), 215-231.
Halpern, J. J., & Stern, R. C. (Eds.). (2018). Debating rationality: Nonrational aspects of
organizational decision making. Cornell University Press.

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Lindblom, C. E. (2017). Some limitations on rationality: A comment. In Rational Decision
(pp. 224-228). Routledge.
Simon, H. A. (1955). A behavioral model of rational choice. The quarterly journal of
economics, 69(1), 99-118.
Zsolnai, L. (2017). Responsible decision making. Routledge.