The Rational Decision Making Process - 1630 Words

A rational decision implies that a qualitative and considered thought process was undertaken in order to reach an optimal outcome. Although there are defined rules that add structure to the rational decision making process (Tripathi PNP 2007; Williams, McWilliams 2013), according to contingency theory and with respect to the rationality paradigm, there are limits to which an optimal outcome is realised (Morgan 1986, p. 167; Schoonhoven 1981, p. 352). External factors such as government, customers, competitors and suppliers all impose their constraints that influence the final decision. Contingency theory suggests that the final decision is ultimately determined by the organisation’s overall objectives coupled with real world limitations, and consequently all rational decisions take the form of bounded rationality and therefore should be considered suboptimal (Todd Gigerenzer 2003, p. 144; March Simon 1958, p. 269). However, there is another view that considers rational dec isions made independently and unbounded will become optimal, or more accurately stated, maximising the expected utility (Von Neumann Morgenstern 1944). Nash (1950) postulated the Nash Equilibrium (NE) and has since been implicated in many aspects of human endeavour, and one of which is rational decision making. A facet of NE shows that a rational decision becomes optimal when a considered decision is made within the context of the organisation’s objectives and is independent of others. 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