Steps in Rational Decision-Making Model

In order to maximize some outcomes, a decision-making model that describes how individuals should behave is known as rational decision-making model.

Below are the different steps involved in the rational decision-making process, you need to know.

Steps in Rational Decision-Making Model

1. Specify the problem
2. Recognize the decision criteria
3. Apportion weights to criteria
4. Build the alternatives
5. Measure the alternatives
6. Choose the best alternatives

See Also: Stages of Buyer Decision Making Process

1. Specifying the Problem

The first step in the rational decision-making model is to specify the problem.

• An issue is a discrepancy between desired and existing state of affairs.
• While overlooking a problem or defining a wrong problem, many poor decisions can be traced to the decision maker.

2. Recognize the Decisions Criteria

The second step in the rational decision-making model is to recognize the decisions criteria, which is necessary to solve the issues or problems.

• What is relevant in making the decision is ascertained by the decision maker. The decision maker considered those factors as irrelevant which are not identified in this step.
• The values, interests and similar personal preferences of the decision maker are brought in by this.

3. Give Correct Priority to the Decisions

The next step in the rational decision-making model is to give the right priorities to decisions based on previously identified criteria.

This is the most important steps as we give correct priority and weight the previously identified criteria.

4. Possible alternative should be Generated

Single solution is never a great solution for any problem. There should be multiple alternatives there against the identified problem.

5. On each Criterion, Rating each Alternative

In this step, we rate the best possible alternative solutions to identify the best possible one.

Basically, this step is all about giving rating to different alternatives like which one should stand on top and which one should have minimum importance.

• Each alternative is critically analyzed & evaluated.
• The weaknesses & strengths of every alternative become obvious as they are compared with the criteria & weights developed in the second & third steps.

6. Choose the best Optimal Decision

Last step is all about calculating the optimal decisions towards solving the problem. We can say this step is all about the finalizing the best possible decision for to mentioned problem.

• Against the weighted criteria, measure each alternative along with choosing the alternative with the highest total score.

See Also: Channel Design Decisions Steps in Marketing

Assumptions of the Rational Decision-making Model

1. Problem Clarity

Regarding the decision situation, the decision maker is supposed to have full information.

2. Known Options

It is supposed that the decision maker is completely aware of all possible results of every alternative.

3. Clear Preferences

Criteria & alternatives can be ordered and weighted to show their significance.

4. Constant Preferences

Particular decision criteria are unvarying and the weights given to them over time are stable.

5. No Time or Cost Constraints

Because it is supposed that there is no time and cost constraints, the rational decision maker can get full information about criteria and information.

6. Maximum Payoff

That alternative will be selected by the rational decision maker which yields the highest perceived value.

Bounded Rationality

By constructing simplified models, individuals make decisions that extract necessary characteristics from their problems that without capturing all their complexity.

See Also: Stages of Business Buying Decision Process

01 – Many people react by minimizing the issue to a level at which it can be readily understood, when faced with a complex problem.

• This is because the confined human-processing ability of individuals creates it impossible to understand & absorb the entire information essential to optimize.
• People search solutions that are sufficient & satisfactory.

02 – Within confines of bounded rationality, persons operate. Simplified models are constructed by them which extract the essential features.

03 – How does bounded rationality functions?

• The search for criteria and alternatives starts.
• The decision maker will start to review it once this limited set of alternatives is identified.
• In determining which alternative is selected, the order in which alternatives are selected is critical.
• The satisfying choice will be first acceptable one the decision maker encounters, assuming that a problem has one essential solution.
• Those alternatives are most likely to be chosen, that depart least from the status quo.