Concept
A decision-making framework provides a structured approach to making choices by outlining steps and criteria to evaluate options and outcomes. It helps in reducing uncertainty and bias, ensuring decisions are more consistent, rational, and aligned with organizational or personal goals.
Relevant Fields:
The Rational Decision-Making Model is a structured and systematic approach to decision-making that involves identifying a problem, generating alternatives, evaluating these alternatives, and choosing the most optimal solution. It assumes that decision-makers have access to complete information and can objectively evaluate each option to maximize outcomes.
Concept
Bounded Rationality is a theory that suggests individuals make decisions based on the limited information they have, their cognitive limitations, and the finite amount of time they have to make a decision. It challenges the traditional notion of perfect rationality in economic models, emphasizing that real-world decision-making is often suboptimal due to these constraints.
Concept
Cost-benefit analysis is a systematic approach to evaluating the economic pros and cons of different choices, aiming to determine the best course of action by comparing the total expected costs against the total expected benefits. It is widely used in public policy, business decision-making, and project management to ensure resources are allocated efficiently and effectively.
Concept
SWOT analysis is a strategic planning tool used to identify and evaluate the Strengths, Weaknesses, Opportunities, and Threats related to a business or project. It helps organizations understand internal and external factors that can impact their objectives, facilitating informed decision-making and strategic planning.
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Heuristics are mental shortcuts or rules of thumb that simplify decision-making processes by reducing the cognitive load required to make judgments. While they can be efficient and effective in certain contexts, they can also lead to systematic biases and errors in reasoning.
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Prospect Theory, developed by Daniel Kahneman and Amos Tversky, describes how people make decisions between alternatives that involve risk, where the probabilities of outcomes are known. It highlights that people value gains and losses differently, leading to irrational decision-making that deviates from expected utility theory.
Concept
Risk assessment is a systematic process of evaluating potential risks that could negatively impact an organization's ability to conduct business. It involves identifying, analyzing, and prioritizing risks to mitigate their impact through strategic planning and decision-making.
Multi-Criteria Decision Analysis (MCDA) is a decision-making framework that evaluates and prioritizes multiple conflicting criteria to aid decision-makers in complex scenarios. It combines quantitative and qualitative data to facilitate a comprehensive analysis of alternatives, ensuring a balanced consideration of diverse factors such as cost, risk, and benefits.
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Game theory is a mathematical framework used for analyzing strategic interactions where the outcome for each participant depends on the actions of all involved. It provides insights into competitive and cooperative behaviors in economics, politics, and beyond, helping to predict and explain decision-making processes in complex scenarios.
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Utility Theory is a foundational concept in economics and decision theory that models how individuals make choices based on their preferences, aiming to maximize their satisfaction or utility. It assumes that people can rank their preferences and make decisions that provide them with the greatest expected utility, even under conditions of uncertainty.
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Strategic principles are foundational guidelines that inform decision-making and actions to achieve long-term goals effectively and sustainably. They provide a framework for aligning resources, capabilities, and environmental factors to maintain competitive advantage and drive organizational success.
Concept
Baseline assumptions are the initial set of beliefs or conditions that individuals or organizations accept as true without concrete evidence, serving as a foundation for further reasoning or decision-making. They influence the trajectory of analysis and outcomes, and reassessing these assumptions is crucial for adapting to new information or changing environments.
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