Tucker Automotive enters into a $750 million dollar partnership with VQI Research. Management has decided that VQI could help them be on the cutting edge of self-driving cars. Tucker did no research and has no idea about the potential market or possible government and safety regulations that might be imposed. But Tucker knows that the personal transportation environment is changing quickly.What type of decision-making model does this reflect? Describe the process in detail as well as any potential constraints.

Question

What will be an ideal response?

Answer 1

Nonrational models of decision making explain how managers actually make decisions. The models typically build on assumptions that decision making is uncertain, that decision makers do not possess complete information, and that managers struggle to make optimal decisions. One of these models is Herbert Simon's normative model.

Herbert Simon's normative model describes the process that managers actually use when making decisions. The process is guided by a decision maker's bounded rationality. Bounded rationality represents the notion that decision makers are bounded or restricted by a variety of constraints when making decisions. These constraints include any personal characteristics or internal and external resources that reduce rational decision making. These limitations result in the tendency to acquire manageable rather than optimal amounts of information. Constraints of bounded rationality cause decision makers to fail to evaluate all potential alternatives, thereby causing them to satisfice (i.e., choosing a solution that meets some minimum qualifications, one that is good enough).