Describe how the administrative model of decision making differs from the classical model and explain the three concepts on which the administrative model is based.

Question

What will be an ideal response?

Answer 1

The classical model is prescriptive and assumes managers can generate a complete list of all alternatives and consequences to make the best choice. The administrative model of decision making acknowledges that managers do not generally have access to all the information needed to make a decision, thereby explaining why decision making is always an inherently uncertain and risky process.

The administrative model is based on three important concepts: bounded rationality, incomplete information, and satisficing. March and Simon coined the term bounded rationality to describe the situation in which the number of alternatives a manager must identify is so great and the amount of information so vast that it is difficult for the manager to even come close to evaluating it all before making a decision. Even if managers had unlimited ability to evaluate information, they still would not be able to arrive at the optimum decision, because they would have incomplete information. Information is incomplete because of risk and uncertainty, ambiguity, and time constraints. March and Simon argued that managers do not attempt to discover every alternative when faced with bounded rationality, an uncertain future, unquantifiable risks, considerable ambiguity, time constraints, and high information costs. Rather, they use a strategy known as satisficing, which is exploring a limited sample of all potential alternatives.