In a decision-making setting, if the manager has to contend with limits on the amount of information he or she can consider, this __________ can lead to a poor decision.
A) bounded rationality
B) suboptimization
C) risk aversion
D) misspecification
E) complexification

Question

Quizplus · Accepted Answer

Bounded rationality refers to the cognitive limitations of decision-makers when they have to process a large amount of information. When a manager has to contend with limits on the amount of information he or she can consider, it can lead to a poor decision due to the inability to process all the relevant information. Suboptimization refers to a situation where a decision-maker focuses on maximizing a particular goal or objective, which may lead to ignoring other important objectives. Risk aversion refers to a decision-maker's tendency to avoid risky decisions, which may not necessarily lead to a poor decision. Misspecification refers to a situation where the decision-maker uses the wrong model or approach to make a decision, which may lead to a poor decision. Complexification is not a recognized term in decision-making.

In a Decision-Making Setting, If the Manager Has to Contend