5.1 Classical Decision Making Model

Jan 13, 2020 | Cognitive Psychology, Courses, ch5 Decision Making & Reasoning in Psychology

Imagine living in a perfect world, where all information is readily available to you. Wouldn’t making decisions in such a world become as easy as pie? The classic model of decision-making gives you a taste of how it would be.

Assumptions Behind the Model

How would you describe ideal conditions for making a decision? You might mention unlimited access to information, fully eliminated uncertainty, and/or perhaps even the ability to predict the future. The classical model of decision-making fits this description quite closely. It is a rational model of decision-making that assumes that managers have access to complete information and are able to make an optimal decision by weighting every alternative. The model then recommends a list of actions for managers to follow to arrive at the decision that’s best for their organizations.

There are four main assumptions behind the classical model:

  • First is a clearly defined problem. The model assumes that the decision-maker has clearly set goals and knows what is expected from him.
  • Next is a certain environment. The model further suggests that it is in the power of the decision-maker to eliminate any uncertainty that might impact the decision. As a result, there are no risks to account for.
  • The third assumption is full information. The decision-maker is able to identify all alternatives available to him and to evaluate and rank them objectively.
  • The final assumption is rational decisions. The decision-maker is believed to always be acting in the best interests of the organization.

Steps in the Classical Model

The classical model proposes three main steps for decision-making:

  1. First is listing all available alternatives. Under the classical model, the decision-maker is not limited by time or resources and can continue looking for alternatives until he identifies the one that maximizes the utility from the decision.
  2. The second step is ranking listed alternatives. The decision-maker is believed to possess not only all required information but also the cognitive ability to prioritize the alternatives accurately and objectively.
  3. The last step of the classical model is selecting the best-suited alternative. Because it’s possible to rank alternatives objectively, it also becomes possible to identify the single best solution of the problem. This is the solution that maximizes the utility of the organization.

Drawbacks of the Classical Model

The first and most obvious drawback of the classical decision-making model is that it’s idealistic. In the real world, managers rarely, if ever, have access to full information. Imagine you’re shopping for apples to make an apple pie. No matter how determined you are to find the best apples, it is unlikely that you will be able to visit every single supermarket, corner shop, market, and local farm in your area.

Second, a manager’s rationality is usually bounded, and his ability to evaluate decision consequences is limited. Thus, the resulting decision is often less than optimal. Even if you are a seasoned cook, it might be difficult for you to predict which variety of apple will taste best in your pie. For example, the taste of the Granny Smiths you usually use may be impacted by the weather this summer, making the apples more sweet or sour than you expected.

Finally, real-world environment is never fully certain, adding risks to the decision-making process. By the time you arrive home with the apples, your partner might have already made blueberry muffins instead.

Lesson Summary

The classical model prescribes the best way to make decisions, based on four assumptions: a clearly defined problem, eliminated uncertainty, access to full information, and rational behavior of the decision-maker. The decision is reached by following three steps: listing the alternatives, ranking the alternatives, and selecting the best alternatives. However, because of the idealistic assumptions of the model, it’s difficult to apply it successfully to real-life situations.

5.2 Expected Utility: Theory & Formula
4.9 What are the Habits of the Mind?