Search results
1 – 10 of over 94000To: evaluate Prospect Theory and Cumulative Prospect Theory as functional models of decision making and risk within various contexts; compare and analyze risk models and…
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
Keywords
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…
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
Keywords
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 proposed…
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
Keywords
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 model that…
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
Keywords
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 why…
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
Keywords
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 to the…
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
Keywords
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…
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
Keywords
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…
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
Keywords
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 be…
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
Keywords
Arpan Kumar Kar and Ashis Kumar Pani
The application of theories on group decision support is yet to be explored extensively in supplier selection literature, although the literature in both domains is extremely…
Abstract
Purpose
The application of theories on group decision support is yet to be explored extensively in supplier selection literature, although the literature in both domains is extremely rich, in isolation. The purpose of this paper is to explore the application of group decision support theories for supplier selection.
Design/methodology/approach
The row geometric mean method (RGMM) of the analytic hierarchy process (AHP) has been used in this study for the prioritization of group preferences under consensus. A case study was conducted to test the theories of consensual group decision making and compare it with other approaches based on AHP.
Findings
The study establishes that the application of decision support theories for group decision making can improve the supplier selection process. Findings further imply that RGMM is more effective than eigen value method, for group decision making under consensus.
Research limitations/implications
Methodologically, the study highlights the greater regularity in outcome of group decision making, vis-à-vis individual decision making, for the same decision-making context. Also, it highlights how RGMM is more effective since it preserves reciprocal properties and diversity in preferences better.
Practical implications
The study establishes that firms can improve supplier selection processes by leveraging on the collective expertise of a group rather than depending on individual decision-making expertise.
Originality/value
This study explores the application of different theories based on AHP for consensual group decision making. It compares different approaches based on AHP and establishes that RGMM is a superior approach for supplier selection.
Details