Question

List the different conditions under which managers make decisions.

Answer 1

Different conditions under which managers make decisions:

1.Certainty vs. Uncertainty

2.Risk

3.Objective Probability vs. Subjective Probability

1.Certainty

The condition under which individuals are fully informed about a problem, alternative solutions are obvious, and the possible results of each solution are clear.

Uncertainty

The condition under which an individual does not have the necessary information to assign probabilities to the outcome of alternative solutions.

2 .RISK

The condition under which individuals can define a problem, specify the probability of certain events, identify alternative solutions, and state the probability of each solution leading to the desired results.

Generally a risk falls somewhere between the extremes of certainty and uncertainty.

3. Objective Probability

Determines the likelihood that a specific outcome will occur based on hard facts and numbers.

Example: examining past records

Subjective Probability

Determines the likelihood that a specific outcome will occur, based on personal judgments and beliefs

This varies between individuals based on expertise, intuition, etc