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Decision making is defined as a process to identify problems, generate alternative

solution, choose the best solution available and combined them. In other words, it is a process of
selecting solution from another alternatives. Another important concept that needs to be look at
into consideration is the making rational decision. Rational decision making refers to making
decision based on fact, opinion and reasonable reasons. Decision that are made based on fact and
opinion are the right choice decision. Not all decision makers can make decision that are rational.
This is because the limitation that exist in the environment or within the decision maker. Words
decision makers and manager will be used usually in this topic. This is because in the
context of an organization, a manager is the person responsible for making decision.
A good decision is not only influenced by the experienced, efficiency and skills of the
decision maker but also the validity of the information. The information mentioned refers to the
information that can help us making a forecast on situation that will occur in the future. We
determine types of decision making by looking at outcomes and the impacted entity. At the
highest level we have chosen to categorize decisions into three major types: consumer decision
making, business decision making, and personal decision making. We make this specific choice
for the purpose of improving decision making by first identifying the types of decision making in
a way that helps establish the context for decisions being made. In our decision making model,
establishing the types of decisions makes it possible to identify the related decisions that will
influence, constrain and be influenced and constrained by a specific decision.

`Generally, there are three information situation in the process of decision making
environment, whether the information contain is complete, incomplete or do not have
information at all. There are three decision making environment or situation, decision making
in certain condition, decision making in uncertain condition and decision making in risky
condition. Uncertainty, which may be both scientifically and socially based, is an inherent
feature of environmental management and arises at many points through the environmental
decision-making process. We experience certainty about a specific question when we have a
feeling of complete belief or complete confidence in a single answer to the question.
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. While there is always some degree of uncertainty about the eventual outcome of
such decisions there is enough clarity about the problem, the situation and the alternatives to
consider the conditions to be certain.
In this situation, the decision maker take the complete information in order to make sure his
decision making. He is able to predict with certainty what situations will occur in the future.
By knowing what will happen in the future. By knowing what will happen in the future, the
result generated by each of the other decision will be able to known with certainty. The choice
that give the best result will be selected. Uncertainty is a complex concept which is not well
understood. Rather like peeling the layers of an onion, as we delve more deeply into the
uncertainty surrounding an environmental management issue, we reveal different forms of
uncertainty. The outcome is that whilst we can reduce uncertainty of one kind by application of
more science to the problem, we will not totally remove uncertainty. The example is Your
insurance will pay for that surgery, but only under certain circumstances, for example if it's an
emergency.

The second decision making environment is decision making in uncertain condition. In


this situation, the decision maker does not have any information that would help in making
decision. The decision maker has to use his experience to make decision. Decision analysis in
general assumes that the decision-maker faces a decision problem where he or she must choose
at least and at most one option from a set of options. In some cases this limitation can be
overcome by formulating the decision making under uncertainty as a zero-sum two-person
game. In decision making decision under uncertainty, the decision-maker has no knowledge
regarding which state of nature is most likely to happen. He or she is probabilistically ignorant
concerning the state of nature therefore he or she cannot be optimistic or pessimistic. In such a
case, the decision-maker invokes consideration of security. Notice that any technique used in
decision making under pure uncertainties, is appropriate only for the private life decisions.
Moreover, the public person has to have some knowledge of the state of nature in order to
predict the probabilities of the various states of nature. Otherwise, the decision-maker is not
capable of making a reasonable and defensible decision in this case.
Uncertainty can pertain to both the past and the future. In particular, a decision maker is
uncertain about some past or future event if he believes there is more than one possible
substantive description or characterization of what has occurred or will occur. For example, a
decision maker in Vancouver may be interested in the weather at the Toronto airport. He is
uncertain about yesterdays, todays, and tomorrows weather if he believes it may have been, is,
or will be clear, cloudy with zero rain, or cloudy with a strictly positive amount of rain.In
representing uncertainty it is useful to introduce the rather abstract concept of a state. We can
think of a state as a complete description of all possible past and future events that are beyond
the decision makers control, but may influence his information or the consequences of his
actions. There are many possible states that may occur, but in the end only one is realized. In
the following discussion we let s represent a specific state and let S represent the set of possible
states.

The completeness assumption implies that s depicts all relevant aspects of the

uncontrollable events that occur over the time frame of the analysis. Hence, the outcome of any
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action can be represented as a function of the decision makers actions and the state.
The non-controllability assumption implies that the decision makers beliefs about the
state are independent of his actions can be represented as a function of the decision makers
actions and the state. The non-controllability assumption implies that the decision makers
beliefs about the state are independent of his actions. decision makers belief about an event that
is a function of the state and his actions depends on his past or planned future actions.
Probabilities are numbers in the interval from zero to one that represent the decision makers
belief about the likelihood of an event occurring. If the decision maker is absolutely certain that
an event is impossible, then the decision makers probability for the event is zero. Conversely, if
the decision maker is absolutely certain that an event has occurred or will occur, then the
decision makers probability for the event is one. More generally, the decision maker is uncertain
about the event and assigns a probability between zero and one. Uncertain about the event and
assigns a probability between zero and one. The probabilities we consider are often referred to as
being subjective and, as noted above, are described as being specific to a decision maker. That
is, probabilities can vary across individuals. This can occur because of differences in their
experiences , example past information or in their fundamental characteristics (e.g., DNA). As
we see later in the book, the existence and source of differences can significantly affect our
analysis.
A decision maker may never fully know the states , even at the end the decision maker
may be uncertain as to what has in fact occurred. However, a decision maker observes events
example the weather on a given day in a given location and receives reports of the observations
of others example a published weather report. Inherently, there are many possible states that will
result in the same observed or reported event, an event is a collection of states (for example,
there are many possible states that have the same weather on a given day at the Toronto airport) .
When making decision in uncertain condition, the decision maker needs have a high
expectation towards risk. Individual who have a high expectation towards risk dare to take risk
in any decision made. Since there is no information available to facilitate the decision making,
it is important for the decision maker to have a high expectation towards risk.

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. We experience uncertainty about a specific question when we can't give a
single answer with complete confident.

Launching a new product, a major change in

marketing strategy or opening your first branch could be influenced by such factors as the
reaction of competitors, new competitors, technological changes, changes in customer demand,
economic shifts, government legislation and a host of conditions beyond your control. These
are the type of decisions facing the senior executives of large corporations who must commit
huge resources. The small business manager faces, relatively, the same type of conditions
which could cause decisions that result in a disaster from which he or she may not be able to
recover.
Solution Methods Differ Under certainty the decision maker can rely on the standard "Vanilla"
process described in this section as, "Decision Analysis." There you are advised to proceed
through the steps of: Problem Definition > Background Information > Situation Description >
Alternative Solutions > Recommendation. Following these steps, the business manager will
reach a satisfactory decision in most cases.
Most often, the small business manager, (a) has little time for research, (b) doesn't need an
exhaustive analysis, (c) can accept the risks and (d) can make reversible decisions.
Large corporations, on the other hand, may have millions of dollars for research, the risks may
be highly punitive and commitments are not easily reversed.

Another decision making environment is decision making in risky condition. Most


manager or decision makers have actually operated in these condition. They have information
but this information is incomplete. Therefore, they will not know for sure the situation that will
happen in the future. Whether the situation will happen or otherwise, cannot be completely
decide. In business and management almost all decisions are taken under some degree of
uncertainty, and therefore involve varying degree of risk. Thus the the decision are not
classified according to presence of absence of risk but by the objectives to be achieved and the
kind of relationship that exists between decision variables and objectives to be achieved. A
general approach toward handling the uncertainty and risk in decision is to assess the nature
and extent of uncertainty and associated risks involved in decisions. Based on such assessment
different approaches may be adopted for factoring in the risk. When the risks involved in a
decision is not very big and the decision is required to be taken frequently, the usual approach
is to take decision based on averages on the assumption that random losses and gains due to
uncertain variations will even out over a period. When the amount of risk in terms of
maximum loss is higher than, various statistical techniques may be used to take decision that
results in best expected value of results without exposing the company to risk of unacceptably
high losses. In final analysis there is no technique or method that will eliminate all risks from
a business, and a business must decide the level of risk it is willing to accept and confine its
activities to the area where the maximum risk does not exceed the acceptable levels.

Every decision is made within a decision environment, which is defined as the collection
of information, alternatives, values, and preferences available at the time of the decision. An
ideal decision environment would include all possible information, all of it accurate, and every
possible alternative. However, both information and alternatives are constrained because the
time and effort to gain information or identify alternatives are limited. The time constraint
simply means that a decision must be made by a certain time. The effort constraint reflects the
limits of manpower, money, and priorities. (You wouldn't want to spend three hours and half a
tank of gas trying to find the very best parking place at the mall.) Since decisions must be
made within this constrained environment, we can say that the major challenge of decision
making is uncertainty, and a major goal of decision analysis is to reduce uncertainty. We can
almost never have all information needed to make a decision with certainty, so most decisions
involve an undeniable amount of risk.
The fact that decisions must be made within a limiting decision environment suggests
two things. First, it explains why hindsight is so much more accurate and better at making
decisions that foresight. As time passes, the decision environment continues to grow and
expand. New information and new alternatives appear--even after the decision must be made.
Armed with new information after the fact, the hind sight can many times look back and make
a much better decision than the original maker, because the decision environment has
continued to expand.
The second thing suggested by the decision-within-an-environment idea follows from
the above point. Since the decision environment continues to expand as time passes, it is often
advisable to put off making a decision until close to the deadline. Information and alternatives
continue to grow as time passes, so to have access to the most information and to the best
alternatives, do not make the decision too soon. Now, since we are dealing with real life, it is
obvious that some alternatives might no longer be available if too much time passes; that is a
tension we have to work with, a tension that helps to shape the cutoff date for the decision.
Many decision makers have a tendency to seek more information than required to make a good
decision. When too much information is sought and obtained, one or more of several problems
can arise. A delay in the decision occurs because of the time required to obtain and process the
extra information.
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This delay could impair the effectiveness of the decision or solution. Information overload
will occur. In this state, so much information is available that decision-making ability actually
declines because the information in its entirety can no longer be managed or assessed
appropriately. A major problem caused by information overload is forgetfulness. When too
much information is taken into memory, especially in a short period of time, some of the
information (often that received early on) will be pushed out. The quantity of information that
can be processed by the human mind is limited. Unless information is consciously selected,
processing will be biased toward the first part of the information received. After that, the mind
tires and begins to ignore subsequent information or forget earlier information.

REFERENCES

http://www.unclemaxsays.com/tools/TL_Dm_certainty.php

http://people.sauder.ubc.ca/faculty/feltham/docs/651-TNDecisions-under-Uncertainty.pdf

http://judgmentanddecisionmaking7.blogspot.com/

http://www.virtualsalt.com/crebook5.htm

http://www.robustdecisions.com/decision-making-tools/risk-vsuncertainty.php

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