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Decision Flexibility: An Alternative Evaluation Criterion.

Stephen R. Heimann¹; Edward J. Lusk²

¹ Assistant Professor of Accounting and Operations Research at The Wharton School, University of Pennsylvania. 1 · ² Associate Professor of Accounting and Operations Research at The Wharton School, University of Pennsylvania. 2

The article focuses on the decision flexibility of decision makers, which is an alternative decision criterion. In complex decision situations, organizational decision makers often are required to elect and implement a specific decision alternative, so that over time the organization best moves towards its goals. Best may depend upon realization of anticipated states of nature and availability of future decision alternatives. When there is risk involved in either the availability of future decision alternatives or occurrences of states of nature, maximization of expected payoff might be used to guide the selection of a particular decision alternative. However, in environmentally dynamic situations, decision makers may seek an alternative criterion, which authors call decision flexibility. A flexible decision is one, which maximizes the probability of achieving a managerially selected output cutoff. A number of researchers found that in complex decision situations, decision-maker selections differed from those, which would be selected using the expectation model. In an attempt to understand the variation between results of the model and the observed decision behavior, utility theory and subjective probability estimation have been introduced into the expectation model.

DOI

10.2308/tar-4502881

Volume

51 (1)

Pages

51-64

Language

en

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