1. Copyright © 1999 Houghton Mifflin Company. All rights reserved. 6 - 0 E. FRANK HARRISON Fifth Edition The Managerial Decision-Making Process

2. Copyright © 1999 Houghton Mifflin Company. All rights reserved. 6 - 1 The Managerial Decision-Making Process Fifth Edition Author: E. Frank Harrison, Ph.D. Slides by Monique A. Pelletier, Ph.D. Author: E. Frank Harrison, Ph.D. Slides by Monique A. Pelletier, Ph.D.

3. Copyright © 1999 Houghton Mifflin Company. All rights reserved. 6 - 2 The Psychology of Decision Making The Psychology of Decision Making Chapter 6

4. Copyright © 1999 Houghton Mifflin Company. All rights reserved. 6 - 3 Personality in Decision Making n Biological, subconscious and hereditary forces n Common traits and unique individuality n Holistic approaches to personality n Empirical perspectives on personality n Personality effects on decision making

5. Copyright © 1999 Houghton Mifflin Company. All rights reserved. 6 - 4 Risk Acceptance/Avoidance Risk Acceptance/Avoidance n Empirical perspectives n A conceptual model of risk acceptance/avoidance

6. Copyright © 1999 Houghton Mifflin Company. All rights reserved. 6 - 5 Figure 6.1 A Conceptual Model of Risk Acceptance/Avoidance Propensity for risk acceptance F G C A E D IH B J Propensity for risk avoidance Probability of success Desirability of the outcome 00.51.0

7. Copyright © 1999 Houghton Mifflin Company. All rights reserved. 6 - 6 Perception in Decision Making Perception in Decision Making n The perceptual process n Characteristics of the perceiver and the perceived n Forming impressions of others: l stereotyping l halo effect l stereotyping l halo effect l projection l perceptual defense l projection l perceptual defense n Situational influences on perception n Empirical perspectives on perception

8. Copyright © 1999 Houghton Mifflin Company. All rights reserved. 6 - 7 Subconscious Influences on Decision Making Subconscious Influences on Decision Making n Freudian influences: l id l ego l superego n Mind levels: l conscious l subconscious l preconscious n Intuition: l effects on decision making l effects on decision making

9. Copyright © 1999 Houghton Mifflin Company. All rights reserved. 6 - 8 Psychological Parameters in Decision Making Psychological Parameters in Decision Making n Personality influences decision making. n There is a human tendency to avoid uncertainty and highly risky situations. n Perception pervades the entire process of decision making. n Preconscious and subconscious thoughts invariably influence the decision parameters.

10. Copyright © 1999 Houghton Mifflin Company. All rights reserved. 6 - 9 Psychological Parameters in Decision Making (cont’d) Psychological Parameters in Decision Making (cont’d) n Knowing one’s self is the best way to counter psychological parameters. n The psychology of decision making militates for: l a judgmental strategy, l a judgmental strategy, l bounded rationality, and l bounded rationality, and l a satisficing outcome. l a satisficing outcome.