ECONOMIC ANALYIS: THE DECISION-MAKING PROCESS.

Decision making may take place by default; that is, a person may not consciously recognize that an opportunity for decision making exists. This fact leads us to a first element in a definition of decision making.

To have a decision-making situation, there must be at least two alternatives available. If only one course of action is available, there can be no decision making, for there is nothing to decide. There is no alternative but to proceed with the single available course of action. (It is rather unusual to find that there are no alternative courses of action. More frequently, alternatives simply are not recognized.)

At this point we might conclude that the decision-making process consists of choosing from among alternativecourses of action. But this is an inadequate definition.Consider the following:

At a race track, a bettor was uncertain about which of the five horses to bet on in the next race. He closed his eyes and pointed his finger at the list of horses printed in the racing program. Upon opening his eyes, he saw that he was pointing to horse number 4.

He hurried off to place his bet on that horse.

Does the racehorse selection represent the process of decision making? Yes, it clearly was a process of choosing among alternatives (assuming the bettor had already ruled out the "do-nothing" alternative of placing no bet). But the particular method of deciding seems inadequate and irrational.We want to deal with rational decision making.

⇒Rational Decision Making

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