Question

As against using established rules in reasoning, the decision making process involves:
1. Cluster of other rules
2. Uncertainty
3. Reliable information
4. None of the above

Answer 1

Correct Answer - Option 2 : Uncertainty

The correct answer is Uncertainty.

• As against using established rules in reasoning, the decision-making process involves Uncertainty.
• When there is no knowledge about the probabilities of the various states of nature, it is a decision under uncertainty.
• In such situation, future events or situation remains unknown.
• It makes the decision-making process more complex.
• It is very difficult to calculate the expected values of various alternatives.
• It can't be measured in quantitative terms.
• Its outcomes are unknown.

• Decision-making is the process of choosing from various alternatives to solve a given problem. 
• Decision-making is an important part of any organization.
• The right decision can bring profitability to the organization.
• A wrong decision can affect the goodwill of the organization.
• Every decision impacts the organization and its employee for a long term.
• There are four types of circumstances in which decisions are taken:
  • ​Decision under certainty
  • Decision under risk
  • Decision under conflict
  • Decision under uncertainty
• The decision under risk:
  • When a decision is based on incomplete but reliable information, it is a decision at risk.
  • It can be measured in quantitative terms.
  • The potential outcomes are known here.
  • It can be controlled if a proper measure is taken by the organization.
  • It can be easily be minimized by taking the necessary steps.
• The decision under certainty:
  • The condition of certainty prevails when there is no doubt about the factual basis of a particular decision.
  • It is the simplest form of decision-making.
  • There is the complete information regarding the outcome of each alternative.
  • If the number of alternatives is small then the outcomes can be compared with each other.
  • If the number of alternatives is large then mathematical tools like linear programming and deterministic inventory models can be used.
  • For instance, the decision is made to buy a car. Once this decision is made, there are many alternatives available to buy a car of which company.
  • It is possible to calculate the total cost of each of these alternatives and choose the one which gives the lowest cost.