Video: decision making for managers: certainty, risk & uncertainty making decisions with the most amount of certainty is something managers learn to do over time in this lesson, we will review how managers work with certainty and risk in order to make informed decisions.
Decisions are made under conditions of incomplete information such as risk and uncertainty what does the irrational/implicit favorite model of decision-making say about decision-making the decision maker selects a favorite early on in the evaluation of alternatives.
Decisions made under the condition of certainty have a high possibility of success all of the information that the decision-maker needs is available the decision-maker knows the alternatives, the objectives, and the outcomes risk is a situation where the decision-maker knows the alternatives and the objectives. Uncertainty: in the environment of uncertainty, more than one type of event can take place and the decision maker is completely in dark regarding the event that is likely to take place the decision maker is not in a position, even to assign the probabilities of happening of the events.
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 under conditions of certainty, accurate, measurable, and reliable information on which to base decisions is available. Decision making under certainty, risk & uncertainty explain the difference between decision-making under certainty, risk and uncertainty decision making is a process of identifying problems and opportunities and choosing the best option among alternative courses of action for resolving them successfully.
All managers make decisions under each condition, but risk and uncertainty are common to the more complex and unstructured problems faced by top managers decisions are made under the condition of certainty when the manager has perfect knowledge of all the information needed to make a decision.
Decision-making conditions: decision is made under three conditions: certainty, risk and uncertainty certainty: when we have a feeling of complete belief or complete confidence in a single answer to the question is called certainty eg decisions such as deciding on a new carpet for the office or installing a new piece of equipment or promoting an employee to a supervisory position are made with a high level of certainty.
Compare decision conditions of certainty, risk, uncertainty, and ambiguity decisions made under the condition of certainty have a high possibility of success all of the information that the decision-maker needs is available. Making decisions when there is uncertainty is a different process than when you know the outcomes (certainty) or the expected range of outcomes (risk) for your machining business the discipline of marshaling facts and using defined processes fails when the realm is uncertain.