Models in Decision Making – Economic Man Model and Administrative Man Model
We generally think that there is need of Rationality in decision making so that rational decisions are made. Rational decisions are the ones in which decisions are based on logical facts and numbers. But total rationality may not be possible and may not be desired as one cannot collect all the data and evaluate all possible alternatives.
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There are two models of decision making which differ according to the emphasis they put on rationality. These two models are as follows.
1. Economic man model (Maximization)
- a. Economic Model believes that person searches for all the possible alternatives and selects the best alternative among them
- b. For this he might have to collect lot of data and information
- c. This believes in perfect rationality
- d. The objective is to maximize the return
- e. The person goes to search all possible alternatives and tries to maximize out of his decision
- f. It is normative in nature which means it is based on standards. It describes what a decision make should do rather than what he does in reaching his decision
2. Administrative Man model (Rationalization)
- a. Administrative Man model believes that person selects the alternative which is satisfactory or good enough though it might not be the best alternative.
- b. For this he might have to use rules of thumb, intuition etc.
- c. This believes decisions cannot be fully rational and these partial rational decisions are based on ‘bounded rationality’ where rationality has certain limits
- d. The objective is to optimize the return
- e. The person keeps on searching alternatives until he finds one that meets some minimum acceptable criteria
- f. It is descriptive in nature which means it considers the behaviour of decision maker as in what does he do while deciding.
In administrative man model, decisions are not always made with full rationality i.e. considering all the alternatives and finding the best one. Rather decisions are made by choosing alternatives which are satisficing i.e. gives good enough satisfaction. This concept is called bounded rationality.
Factors that limit rationality to bounded rationality are
- 1. Limited Information of Alternatives
- 2. Time Constraint
- 3. Personal value system affects choice of alternative
- 4. Perception also affects choice of alternative. If work is not getting completed on time, one person may see it as lack of efficiency on current resources whereas other may see it as need for more resources.
What is the economic man model of decision making?
The economic man model believes that a person searches for all possible alternatives and selects the best alternative among them, based on the objective of maximizing the return. It is normative in nature and assumes perfect rationality.
What is the administrative man model of decision making?
The administrative man model believes that a person selects a satisfactory or good enough alternative, based on rules of thumb, intuition, and bounded rationality. The objective is to optimize the return and the model is descriptive in nature.
How does the economic man model differ from the administrative man model?
The economic man model emphasizes perfect rationality, assumes that all possible alternatives are evaluated, and is based on maximizing the return. The administrative man model assumes bounded rationality, focuses on satisficing, and is descriptive in nature.
What is meant by bounded rationality in the administrative man model of decision making?
Bounded rationality in the administrative man model refers to the idea that decisions are not always made with full rationality, but rather by choosing alternatives that are satisfactory or good enough.
What is the difference between normative and descriptive models of decision making?
Normative models describe what a decision maker should do, while descriptive models consider what a decision maker actually does. The economic man model is normative, while the administrative man model is descriptive.
