Strategies In Decision Making

Nothing is more difficult, and therefore more precious, than to be able to decide. -Napoleon Bonaparte

Some of the decision making techniques that we use in everyday life include:

• listing the advantages and disadvantages of each option, popularized by Benjamin Franklin
• flipping a coin, cutting a deck of playing cards, and other random or coincidence methods
• accepting the first option that seems like it might achieve the desired result
• tarot cards, astrology, augurs, revelation, or other forms of divination
• acquiesce to a person in authority or an "expert"

There are often many solutions to a given problem, and the decision maker's task is to choose one of them. The task of choosing can be as simple or as complex as the importance of the decision warrants, and the number and quality of alternatives can also be adjusted according to importance, time, resources and so on. There are several strategies used for choosing. Among them are the following:

1. Optimizing
This is the strategy of choosing the best possible solution to the problem,discovering as many alternatives as possible and choosing the very best. How thoroughly optimizing can be done is dependent on

A. importance of the problem
B. time available for solving it
C. cost involved with alternative solutions
D. availability of resources, knowledge
E. personal psychology, values

Note that the collection of complete information and the consideration of all alternatives is seldom possible for most major decisions, so that limitations must be placed on alternatives.

2. Satisficing
In this strategy, the first satisfactory alternative is chosen rather than the best alternative. If you are very hungry, you might choose to stop at the first decent looking restaurant in the next town rather than attempting to choose the best restaurant from among all (the optimizing strategy). The wordsatisficing was coined by combining satisfactory and sufficient. For many small decisions, such as where to park, what to drink, which pen to use, which tie to wear, and so on, the satisficing strategy is perfect.

3. Maximax
This stands for "maximize the maximums" . This strategy focuses on evaluating and then choosing the alternatives based on their maximum possible payoff. This is sometimes described as the strategy of the optimist, because favorable outcomes and high potentials are the areas of concern. It is a good strategy for use when risk taking is most acceptable, when the go-for-broke philosophy is reigning freely.

4. Maximin
This stands for "maximize the minimums". In this strategy, that of the pessimist, the worst possible outcome of each decision is considered and the decision with the highest minimum is chosen. The Maximin orientation is good when the consequences of a failed decision are particularly harmful or undesirable. Maximin concentrates on the salvage value of a decision, or of the guaranteed return of the decision. It's the philosophy behind the saying, "A bird in the hand is worth two in the bush."

Quiz shows exploit the uncertainty many people feel when they are not quite sure whether to go with a maximax strategy or a maximin one: "Okay, Mrs. Freen, you can now choose to take what you've already won and go home, or risk losing it all and find out what's behind door number three."

Example: I could put my $10,000 in a genetic engineering company, and if it creates and patents a new bacteria that helps plants resist frost, I could make $50,000. But I could also lose the whole $10,000. But if I invest in a soap company, I might make only $20,000, but if the company goes completely broke and gets liquidated, I'll still get back $7,000 of my investment, based on its book value.

Example: It's fourth down and ten yards to go on your twenty yard line. Do you go for a long pass or punt? Maximax would be to pass; Maximin would be to punt.