Which family business decision-making process will be most affected by bounded rationality?


#1

(1) Which family business decision-making process will be most affected by bounded rationality?

a. Collaborative
b. Independent
c. Autocratic
d. Consensus
e. Democratic

(2) Which decision-making style listed in the text most aligns with an autocratic process?

a. Conceptual Style
b. Directive Style
c. Analytical Style
d. Events Style
e. Behavioral Style

(3) Which of the following would not be considered by a family owned business in their process of deciding to decide?

a. Situation’s possible benefits or damages
b. Importance of the situation
c. Urgency of the situation
d. Credibility of the situation
e. How many people are involved

(4) Which decision-making bias is most likely to plague consensus decision making?
a. Anchoring and adjustment bias
b. Escalation of commitment bias
c. Sunk-cost bias
d. Confirmation bias
e. Hindsight bias

Answer:

(1) C.
An autocratic decision making process will be most affected by bounded rationality. The reason is, an autocratic decision maker, takes decision based on his undersatndings of things, and does not encourage any contrarian views. Such kind of decison maker is most susceptible to bounded rationality issue, whereby decisions taken are limited to the decision makers knowledge.

(2).B
A directive style is most aligned to an autocratic process. Any autocratic decison making is directive bynature, where the decision maker is more concerned with people following his orders in toto, and less on hearing any alternate views.

(3).E
All the other options are valid considerations. Choice E is incorrect. A family business decision making process does not consider the number of people taking part in decision making process.

(4).D
A confirmation bias might plague a consensus decision making. In a group decsion maing it is difficult to hold a contrarian view. A general tendency is to go with the most favored view and, participants tend to overlook individual objections, to support a popular view.