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Decision Making Under Uncertainty
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| Decision Making Under Uncertainty Uncertainty simply means that it is impossible to assess the likelihood of various possible future events, hence, decisions taken under uncertainty are necessarily subjective in nature. Uncertainty is also referred to as a situation in which there is more than one outcome of a business decision and the probability of no outcome is known or can be meaningfully estimated. The unpredictability of the outcome maybe due to lack of reliable market information, inadequate past experience, high volatility of the market conditions, etc. A situation of uncertainty is one which neither the outcome nor the probability associated with the state of nature is known. In this case, each action will lead to one outcome out of the known sets of outcomes. Ina situation of uncertainty, there is no one best criterion for taken a decision or for selecting a particular course of action. Here, the decision maker only has a meager Meager, i.e., small in quantity and poor in quality) database, he/she does not know whether or not the situation may change. Besides, the decision-maker cannot evaluate the interactions of the different variables. Under this situation, the decision-maker does not know the exact probabilities attached to the alternatives available to him. This is a condition under which an individual does not have the necessary information needed to assign probabilities to the outcomes of alternative solutions. In fact, the decision maker may have so little information that he or she may not even be able to define the problem, not to mention of identifying the alternative solution and possible outcomes. In short, uncertainty suggests that the problem and the alternative solutions are both ambiguous and highly unusual. Making decisions under the condition of uncertainty is an important facet of the jobs of today’s managers and professionals. When managers make decision under conditions of uncertainty, they must acquire as much relevant information as possible and then use logic, intuition, judgment, and experience to determine the best course of action to follow. Of all the conditions that affect decision making, uncertainty is the condition under which managers are the least confident about their decision making and it is the condition where managers are more prone to make errors. Organisations face uncertainty at very many occasions. For example when an organization introduces anew product to an existing market, the prospect of the market is uncertain irrespective of the level or marketing 128 research conducted before the launch of the product. Another example is when a company decide to operate in the international market the company cannot predict the political, legal and socio-cultural environments in absolute terms. In short, the political environment maybe so volatile that even experts in political environment assessment cannot predict a possible change in government. Download 3.37 Mb. Share with your friends:
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