| Step 8: Evaluation of Decision Effectiveness
The result of the decision is evaluated to see whether it has corrected the
problem.
Assumptions of the Rational Model
- It is assumed that the decision maker is rational. The assumptions of
rationality are
a. the problem is clear and unambiguous
b. a single, well-defined goal is to be achieved
c. all alternatives and consequences are known
d. preferences are constant, stable and clear
e. no time or cost constraints exist
f. final choice will maximize economic payoff
2.2 Limitations of the Rational Model
The assumptions of rationality often do not hold true. In the Rational
Model, the decision maker knows the outcome of every possible alternative.
However, in the real world, decision makers often do not have full
knowledge of the problem and cannot determine even a reasonable
probability of alternative outcomes (this is under the condition of
uncertainty.)
2.3 Modification of the Rational Model
As it is impossible for human beings to process and understand all the
information necessary to meet the test of rationality, what they do is
construct simplified models that extract the essential features from
problems without capturing all of their complexities.
This decision-making process is called bounded rationality.
Under the definition of bounded rationality, decision makers can behave
rationally within the limits of the simplified model.
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