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1 – 10 of over 101000
Article
Publication date: 1 April 2005

Michael Nwogugu

To: evaluate Prospect Theory and Cumulative Prospect Theory as functional models of decision making and risk within various contexts; compare and analyze risk models and…

3100

Abstract

Purpose

To: evaluate Prospect Theory and Cumulative Prospect Theory as functional models of decision making and risk within various contexts; compare and analyze risk models and decision‐making models; evaluate models of stock risk developed by Robert Engle and related models; establish whether the models are related and have the same foundations; relate risk, decision making and options theory; and develop the foundations for a new model of decision making and risk named “belief systems”.

Design/methodology/approach

Critiques existing academic work in different contexts. Analyzes the shortcomings of various measures of risk, and group decision making, which was not addressed in developing Prospect Theory and Cumulative Prospect Theory. Develops the characteristics of a mew model for decision making and risk named “belief systems”, and then differentiates it from belief networks.

Findings

Decision making is a multi‐factor, multi‐dimensional process that often requires the processing of information, and thus, it is inaccurate to impose rigid models in decision making; the existing metrics for quantifying risk are inadequate; Prospect Theory and Cumulative Prospect Theory were developed using questionable methods and data, and are impractical; the analysis of probabilistic insurance and most of the theories and “effects” developed by Kahneman and Tversky's articles are invalid and impractical; Prospect Theory, Cumulative Prospect Theory, Expected Utility Theory, and market‐risk models are conceptually the same and do not account for many facets of risk and decision making; risk and decision making are better quantified and modeled using a mix of situation‐specific dynamic, quantitative and qualitative factors; belief systems can better account for the multi‐dimensional characteristics of risk and decision making.

Research limitations/implications

Areas for further research include: development of dynamic market‐risk models that incorporate asset‐market psychology, liquidity, market size, frequency of trading, knowledge differences among market participants, and trading rules in each market; and further development of concepts in belief systems.

Practical implications

Decision making and risk assessment are multi‐criteria processes that typically require some processing of information, and thus cannot be defined accurately by rigid quantitative models; Prospect Theory and Cumulative Prospect Theory are abstract, rigid, and are not practical models for decision making; and existing market‐risk models are inaccurate, and thus the international financial system may be compromised.

Originality/value

The issues discussed are relevant to government regulators, central banks, judges, risk managers, executives, derivatives regulators, stock exchange regulators, legislators, psychologists, boards of directors, finance professionals, management science/operations research professionals, health‐care‐informatics professionals, scientists, engineers, and people in any situation that requires decision making and risk assessment.

Details

The Journal of Risk Finance, vol. 6 no. 2
Type: Research Article
ISSN: 1526-5943

Keywords

Article
Publication date: 1 April 2005

Michael Nwogugu

To: evaluate Prospect Theory and Cumulative Prospect Theory as functional models of decision making and risk within various contexts; compare and analyze risk models and…

3628

Abstract

Purpose

To: evaluate Prospect Theory and Cumulative Prospect Theory as functional models of decision making and risk within various contexts; compare and analyze risk models and decision‐making models; evaluate models of stock risk developed by Robert Engle and related models; establish whether the models are related and have the same foundations; relate risk, decision making and options theory; and develop the foundations for a new model of decision making and risk named “belief systems”.

Design/methodology/approach

Critiques existing academic work in different contexts. Analyzes the shortcomings of various measures of risk, and group decision making, which was not addressed in developing Prospect Theory and Cumulative Prospect Theory. Develops the characteristics of a mew model for decision making and risk named “belief systems”, and then differentiates it from belief networks.

Findings

Decision making is a multi‐factor, multi‐dimensional process that often requires the processing of information, and thus, it is inaccurate to impose rigid models in decision making; the existing metrics for quantifying risk are inadequate; Prospect Theory and Cumulative Prospect Theory were developed using questionable methods and data, and are impractical; the analysis of probabilistic insurance and most of the theories and “effects” developed by Kahneman and Tversky's articles are invalid and impractical; Prospect Theory, Cumulative Prospect Theory, Expected Utility Theory, and market‐risk models are conceptually the same and do not account for many facets of risk and decision making; risk and decision making are better quantified and modeled using a mix of situation‐specific dynamic, quantitative and qualitative factors; belief systems can better account for the multi‐dimensional characteristics of risk and decision making.

Research limitations/implications

Areas for further research include: development of dynamic market‐risk models that incorporate asset‐market psychology, liquidity, market size, frequency of trading, knowledge differences among market participants, and trading rules in each market; and further development of concepts in belief systems.

Practical implications

Decision making and risk assessment are multi‐criteria processes that typically require some processing of information, and thus cannot be defined accurately by rigid quantitative models; Prospect Theory and Cumulative Prospect Theory are abstract, rigid, and are not practical models for decision making; and existing market‐risk models are inaccurate, and thus the international financial system may be compromised.

Originality/value

The issues discussed are relevant to government regulators, central banks, judges, risk managers, executives, derivatives regulators, stock exchange regulators, legislators, psychologists, boards of directors, finance professionals, management science/operations research professionals, health‐care‐informatics professionals, scientists, engineers, and people in any situation that requires decision making and risk assessment.

Details

The Journal of Risk Finance, vol. 6 no. 2
Type: Research Article
ISSN: 1526-5943

Keywords

Article
Publication date: 27 September 2011

Milorad M. Novicevic, Russell W. Clayton and Wallace A. Williams

The purpose of this paper is to examine Chester Barnard's decisional model utilizing the lens of image theory. The main claim is that the individual decision‐making model…

2467

Abstract

Purpose

The purpose of this paper is to examine Chester Barnard's decisional model utilizing the lens of image theory. The main claim is that the individual decision‐making model proposed by Barnard in his Notes on the Significance of Decisive Behavior can be evaluated within the framework of image theory.

Design/methodology/approach

The paper performed a comparative analysis of Barnard's and image theory's models of decision making to outline congruence and incongruence between Barnard's early conceptualization of individual decision making and the contemporary understanding of image theory.

Findings

The findings provide support to the claim that image theory is an appropriate framework to describe Barnard's model.

Originality/value

The unique contribution of this study is that it provides the first theoretical analysis of Barnard's model of individual decision making. Barnard's model of individual decision making is little known because it was posthumously published in his Notes on the Significance of Decisive Behavior 35 years after Barnard's death.

Details

Journal of Management History, vol. 17 no. 4
Type: Research Article
ISSN: 1751-1348

Keywords

Article
Publication date: 12 August 2020

Muhammed Bolomope, Abdul-Rasheed Amidu, Olga Filippova and Deborah Levy

Decision-making behaviour of property investors has been the focus of real estate research for decades. Yet, there is no consensus on a generally accepted behavioural…

Abstract

Purpose

Decision-making behaviour of property investors has been the focus of real estate research for decades. Yet, there is no consensus on a generally accepted behavioural model that suits all market conditions and investment peculiarities. While scholars have emphasized the significance of rational reasoning and cognitive influences on property investment decision-making preferences, gaps remain regarding the impacts of market disruptions on property investment decision-making behaviour. This paper, therefore, explores the institutional framework as a theoretical basis for understanding property investment decision-making behaviour amidst market disruptions.

Design/methodology/approach

This paper reports a systematic review of pertinent theories that have explored decision-making behaviour. Commencing with an index search of high impact peer-reviewed journals, a snowball identification of relevant citations was also deployed to assemble theories from the field of psychology, sociology, economics and urban studies. Although a preliminary dataset of 82 papers with relevant decision-making theories was identified, the final dataset comprised 27 papers and 7 theories. The identified theories were reviewed accordingly.

Findings

The outcome of this study suggests that the institutional framework offers a robust approach to property investment decision-making amidst market disruptions, especially because it recognizes the dynamism in the investment environment and the roles of formal and informal rules that exist therein.

Originality/value

This study advances the current understanding of property investment decision-making behaviour by recognising the dynamism of the investment environment and how factors such as principles, laws, tradition and routines can lead to an established and legitimate standard of reasoning. By integrating both rational and cognitive attributes, the study provides a holistic perspective to property investors' decision-making behaviour in response to market disruptions.

Details

Property Management, vol. 39 no. 1
Type: Research Article
ISSN: 0263-7472

Keywords

Abstract

Details

Organization Theory
Type: Book
ISBN: 978-1-78560-946-6

Article
Publication date: 29 July 2014

S. Mohammad H. Mojtahedi and Bee Lan Oo

In disaster risk reduction (DRR), it is important to realise stakeholders’ approaches against disasters in the built environment. The purpose of this paper is to explore…

1656

Abstract

Purpose

In disaster risk reduction (DRR), it is important to realise stakeholders’ approaches against disasters in the built environment. The purpose of this paper is to explore why stakeholders take proactive and/or reactive approaches in DRR.

Design/methodology/approach

Using a review of existent literature, this work scrutinises disaster theories and their applications in the built environment to develop a theoretical framework for perceiving stakeholders’ proactive and/or reactive approaches in DRR.

Findings

Stakeholders’ organisational attributes – power, legitimacy and urgency – and decision-making paradigms – value maximisation and intuitive reasoning – are fundamental factors affecting stakeholders’ approaches against disasters. Power and legitimacy of stakeholders result in a proactive approach if stakeholders consider value maximisation paradigm in their decision-making process. Powerful and legitimate stakeholders may take reactive approaches because of intuitive reasoning paradigm. Stakeholders may shift from a reactive to proactive approach and vice versa based on the combination of urgency attribute and decision-making paradigms.

Research limitations/implications

It is essential to consider the classification of respective stakeholders in applying the idea of this paper. Furthermore, this paper does not attempt to validate the proposed theoretical framework empirically, but it combines stakeholder and decision-making theories by which this could be undertaken.

Originality/value

Little attention has been paid to systematic theorising in managing stakeholders’ approaches against disasters. Furthermore, many researchers have focused on similar underlying theories and heuristics in the context of DRR. Thus, this paper introduces a theoretical framework to examine stakeholders’ proactive and/or reactive approaches in the built environment, by synthesising stakeholder and decision-making theories.

Details

Disaster Prevention and Management, vol. 23 no. 4
Type: Research Article
ISSN: 0965-3562

Keywords

Article
Publication date: 1 August 1996

Stephen Batstone and John Pheby

Discusses the contributions to economic theory by various authors and covers popular beliefs about entrepreneurial function. Analyses the potential contribution of Shackle…

2466

Abstract

Discusses the contributions to economic theory by various authors and covers popular beliefs about entrepreneurial function. Analyses the potential contribution of Shackle to the development of entrepreneurial theory and outlines key elements of his theory. Concludes that a better understanding of Shackle’s decision‐making theory is useful, particularly now there is renewed interest in entrepreneurship.

Details

International Journal of Entrepreneurial Behavior & Research, vol. 2 no. 2
Type: Research Article
ISSN: 1355-2554

Keywords

Article
Publication date: 13 July 2012

Ekaterina Nemkova, Anne L. Souchon and Paul Hughes

The purpose of this paper is to examine two predominant export decision‐making orientations emanating from normative and descriptive decision theory, namely planning and…

3117

Abstract

Purpose

The purpose of this paper is to examine two predominant export decision‐making orientations emanating from normative and descriptive decision theory, namely planning and improvisation and their coexistence within exporting firms. In addition, contingencies under which one may be more appropriate than the other for optimal performance consequences are identified.

Design/methodology/approach

A qualitative study was conducted with UK exporters by way of in‐depth interviews. The results were analyzed using within‐ and cross‐case displays of in‐vivo and literature‐based codes, based on Miles and Huberman's recommendations.

Findings

The study reveals widespread use of improvisation in export functions, and its co‐existence with export planning for enhanced decision‐making. In addition, resource‐ and capabilities‐based moderators are identified that may affect the ways in which planning and improvisation are related to export performance.

Research limitations/implications

This is a preliminary study which addresses the two export decision‐making orientations together for the first time. Further quantitative research is needed to formally test the conceptual model developed.

Practical implications

Export decision‐makers often feel guilty about improvising, believing that planning is the accepted norm. Avoidance and covert use of improvisation, however, are not necessary. Indeed, export improvisation can have many positive consequences for the export function, especially when combined with export planning.

Originality/value

Research on export decision‐making has tended to focus on normative decision theory (from which planning emerges), largely overlooking descriptive approaches which identify improvisation as a valid decision‐making orientation. However, in today's global and competitive environment, better performance consequences are increasingly to be found in the faster and more creative export decisions that improvisation can afford. This study addresses for the first time how benefits can be drawn from employing a combination of export planning and improvisation.

Details

International Marketing Review, vol. 29 no. 4
Type: Research Article
ISSN: 0265-1335

Keywords

Article
Publication date: 28 September 2010

Behrooz Kalantari

The paper aims to explore the life and contributions of one of the most influential management scholars (Herbert A. Simon), who is known as the founder and contributor to…

9180

Abstract

Purpose

The paper aims to explore the life and contributions of one of the most influential management scholars (Herbert A. Simon), who is known as the founder and contributor to many scientific fields. Simon's interdisciplinary approach in conducting his research in management has made him a significant figure in many disciplines.

Design/methodology/approach

The paper is of a qualitative nature, and information is collected from the books and articles that are written by Simon as well as those who have been familiar with his work. This paper concentrates on Simon's contribution to the decision‐making theory and, more specifically, his insights into the process of decision making in real world situations. It explores the tenets of the classical and neoclassical approach to decision making and argues that because of Simon's work, attention was diverted from concentration on studying the organizational structure to the behavior of the decision makers during the process of making decisions. This new orientation brought more attention to the behavioral approach in studying decision making in organizations. Special attention is given to Simon's “bounded rationality” model and its relation to the process of decision making. This paper also deals with Simon's view on the role of intuition in decision making and explores the practicality of using his model in the real world.

Findings

Simon opened up a new world of scientific inquiry that its main focus is on the development of the most effective and realistic model for the decision makers to predict future outcomes.

Research limitations/implications

The paper only concentrates on the core contribution of Herbert Simon's work on the decision‐making process. It does not indulge itself in Simon's related work in other disciplines such as computer science and artificial intelligence. In addition, this paper does not deal with the new developments in the theories of decision making. Future research could concentrate on the new discoveries concerning the ability of humans to construct thinking machines in order to improve productivity in organizations.

Originality/value

The paper examines the productive life of Herbert Simon and develops a realistic portrait of his core contributions to humanity (decision making). It involves the reader with the intricacies of the decision making process as it is examined and studied by Simon.

Details

Journal of Management History, vol. 16 no. 4
Type: Research Article
ISSN: 1751-1348

Keywords

Article
Publication date: 2 November 2015

Dilip Kumar Sen, Saurav Datta and Siba Sankar Mahapatra

Decision making is the task of selecting the most appropriate alternative among a finite set of possible alternatives with respect to some attributes. The attributes may…

Abstract

Purpose

Decision making is the task of selecting the most appropriate alternative among a finite set of possible alternatives with respect to some attributes. The attributes may be subjective or objective (or combination of both), depending upon the situation; requirements may also be conflicting. In practice, most of the real-world decision-making problems are based on subjective evaluation criteria which are basically ill-defined and vague. Since subjective human judgment bears ambiguity and vagueness in the decision making; application of grey numbers set theory may be proved fruitful in this context. The paper aims to discuss these issues.

Design/methodology/approach

Owing to the advantages of grey numbers set theory in tackling subjectivity in decision making; the crisp-TODIM needs to be extended by integrating with grey numbers set theory in order to facilitate decision making consisting of subjective data. Hence, the unified objective of this paper is to propose a grey-based TODIM approach in the context of decision making.

Findings

Application potential of grey-TODIM has been demonstrated through a case empirical robot selection problem. Result obtained thereof, has also been compared to that of existing grey-based decision support systems available in literature.

Originality/value

Application potential of grey-based decision support systems (grey-TOPSIS, grey analysis, grey-MOORA) have been highlighted in available literature resource. However, the shortcoming of these approaches is that they do not consider decision-makers’ risk attitude while decision making. TODIM method is derived from the philosophy of Cumulative Prospect Theory (CPT) which considers risk averting attitude of the decision maker in case of gain and risk seeking attitude in case of loss, while comparing dominance between two alternatives with respect to a particular criterion. Hence, this paper contributes a mathematical foundation of TODIM coupled with grey numbers set theory for logical decision making.

Details

Grey Systems: Theory and Application, vol. 5 no. 3
Type: Research Article
ISSN: 2043-9377

Keywords

1 – 10 of over 101000