Rational Decision Making Models and What People Actually Do - Coursework Example

Rational decision making models and what people actually do Name Institution Date Course Rational decision making models and what people actually do Introduction Researchers have investigated decision making processes for many years now. This study has continued to evolve with contributions that span several disciplines for more than 300year. Contributions towards this research have included the provision of mathematical backgrounds in the field of economics, as well as other fields like finance and medicine. Consequently, decision making theories and models have embodied a wide range of concepts which exert a considerable level of influence on cognitive, biological and social sciences (Doyle & Thomason, 1999). There is increasing concern, however, about whether or not these models influence the actual decision making process of individuals and what they do during the decision making process. This paper mainly focuses on decision making by investigating literature material and attempting to find the link between the decision making models and what people actually do. Rational decision making According to Eisenfuhr (2011), decision making involves making a choice from possible alternatives so as to realise the desired result. That is, the decision will be seen to be more rational if the process that leads to it is based on insight into the consequences of alternatives so that the final selection relies upon the logic of choosing the option that is expected to best achieve the goals and objectives of the decision maker (Kørnøv & Thissen, 2000). The decision making process therefore, is influenced by the number of options available as well as the desired result. Normative and descriptive decision making theories propose specific characteristics and follow particular methodologies that should lead the decision maker towards the selection of a course of action. Normative theories, also known as rational theories, are based upon fundamental axioms. If the decision maker accepts the established principles, then they can derive a normative theory of choice. In descriptive theories, however, greater stress is laid upon the significance of psychological elements that influence decision making (Oliveira, 2007). Consumer decision making models have provided broad structures that are organized to reveal the fundamental processes followed during decision making from particular viewpoints and specific instances (Walters 1978). The decision making models have been put to use in structuring and interpretation of research in consumer purchase behaviour. This therefore means that the approach of the research during the implementation of a particular model takes into account certain assumptions. As will be demonstrated later in the paper, generalising such decision making models for a random product directly implies that the process of arriving at the decision is biased from the very beginning. Rational decision making models hold that decision making involves analysis of a series of available options from different scenarios before a particular choice is selected. The decision maker then weighs these scenarios by means of probabilities then determines the expected scenario for all the alternatives. The choice that should be selected is that one which will present the best scenario among all the alternatives. During normative decision making processes, decision makers apply specific sets of alternatives to find solutions to their problems. According to Schoenfeld (2011), the decision making process is broken down into six steps during rational decision making: Identification of the problem Generation of alternatives Evaluation of the alternatives Making the choice among alternatives Implementation of the chosen decision Evaluation of the effectiveness of the decision But as Hoch et al (2000) found out, people will not always stick to rational models of decision making since human behaviour will not always be based on theoretical reasoning in these models. These researchers stated that such variations in human behaviour can be identified when unpredictable scenarios encourage the decision makers to ignore probabilities and to follow the normative ways as opposed to the unusual ways. When investigating the developments in consumer behaviour research, Sirgy (1983) disagreed with traditional models that interpreted the behaviour of consumers. He managed to come up with with a classification consumer decision making processes which he described in three levels: a micro level (which was based upon human sensation or perception), others at a micro-macro level (which included the five decision making steps) and the rest at a macro level (which included repeated purchase behaviour and diffusion of innovation). He further recommended that consumer purchase decisions could be categorised for purposes of discussion and research as opposed to generalization of this processes within some form of models. Jones (1999) explored decision making processes in politics and economics and found out that although human beings would want to make and arrive at rational outcomes, they will not always use rational ways, especially if rational meant sticking to the classic expected utility model. According to Jones (1999) the implications for politics is that in general terms, decision making is characterised by rational responses to the environment, but at usually important instances, rationality fails. Consequently, there grows a mismatch between the decision maker’s choices and the decision making environment. Traditional economic theory holds the assumption that there is complete rationality; that the ‘economic decision maker’ ensures maximum profit by finding the best solution to the problem at hand. This theory assumes that the individual has exclusive access to all the information required to make sound decisions. It also demands that all alternatives are considered as well as the consequences that surround any given alternative. It is evident, however, that the theories of rational economic behaviour do not apply to individual reality (Kørnøv & Thissen, 2000). It is not always the case that the decision maker knows all the alternatives, preferences and consequences. The possible alternatives must be searched, the consequences associated with particular options researched and the preferences must be found and developed. This makes the rational decision making process too involving and tedious that decision makers will less likely care to follow. Haubl and Trifts (2000) state that consumers are usually not able to carry out in depth evaluation of all the possible alternatives during a decision making process. The authors argue that consumers are usually persuaded to make a purchase decision in two steps. Consumers first hurriedly scan through several products before they decide to focus upon a subset of the alternatives that is most promising. They then carry out a more detailed scrutiny of the subset and then compare the products against certain specific attributes. Once this has been done, consumers will then go ahead and decide on a particular product. Since all these tasks are completed within a two stage process, certain interactive tools which can be used during the decision making exist. These tools can be used by consumers in the following respects: (1) the initial stage when consumers perform product screening to find those that will be taken through more detailed scrutiny; (2) the detailed evaluation performed on chosen products before the final purchasing decision is made. Haubl and Trifts (2000) describe these two tools and provides systematic real life decision making processes that are applicable to many consumer decision makers today. Criticisms of the arbitrary application of the consumer behaviour models have been raised since they were first introduced (Erasmus, Boshoff & Rousseau, 2001). The scarce theoretical background of the rational models has been cause for objection, most of which have been categorised in terms of: a generalization of the process followed during the decision making; assumptions regarding the rational consumer decision making behaviour; issues surrounding the details required in the consumer decision making models and the disadvantages that results from the positivistic approach adopted when developing consumer behaviour models. As Erasmus, Boshoff and Rousseau (2001) further point out, the rational decision making model has been questioned because research has revealed that in many instances, consumers do not spend much time and in other instances, they do not even get involved in the sequential steps proposed by the model as being critical in the decision making process. Researchers have found out that in many occasions, consumers are engaged in non-conscious behaviour while they make decisions about what they will purchase. Hayes-Roth (1982) mentioned that actual customer decision making processes have, in certain instances, appeared to be haphazard and disorganised when in the real sense, the processes are highly adaptive and functional although opportunistic. The opportunistic approaches do not reflect prearranged and inflexible decision making models or behaviour. A number of researchers have agreed that a good number of consumers engage in little or limited planning before they get into retail stores. It has also been found that consumers engage in and apply a range of purchase decision making strategies which are dependent upon the product, previous experience, context of the decision making and prevailing situation. As Solomon (1996) says, some researchers have also suggested that buyers must not employ particular rigid decision rules for them to realise optimum decision making. They would rather rely upon heuristics that would contribute to the satisfaction of the purchase decision (like an acceptable price or in other cases, a trusted brand name). Schiffman and Kanuk (2000) argued that the rational consumer has also been criticized by researchers who believed that consumers employ both cognitive and emotional information processing before they purchase items. Cognitive information processing means active and deliberate arrangement as well as objective-setting consumer behaviour that requires decision makers to deliberately engage in intellectual meditation. Emotional processing, on the other hand, refers to process of evaluating available alternatives within more abstract parameters. Consumers are driven to purchase by emotional needs and the alternatives present at their disposal may not have equal chances due to other factors like financial status, culture or taste. When individuals set out to buy clothes, for example, they may have planned and saved money for shopping. They may know specific designs about the clothes that they prefer. Ladies will either prefer short skirts or long ones and this may determine the specific stores or shops where they will go to buy from. individuals may prefer jeans trousers while others will prefer handmade designs. These prior information and preferences are critical in the decision making process and play a major role in the same. It is true however, that consumers will not have complete information about the products. A buyer may purchase clothes without being sure about the strength of the materials or its durability. The buyer may be persuaded by other factors like fashion or affordability. This is contrary to the rational decision making models which stress that the decision must be fully informed and the chosen product must be the best alternative. These facts are complicated by the rational decision making where the decision to purchase should arise from the analyses of the alternatives and the selection of the best alternative among the available options. The rational decision making demands that the decision maker must therefore, be aware of all the available alternatives and that he/ she must be able to correctly rank product alternatives with regard to their positive and negative attributes before the one with dominant attributes is selected. Since consumers live and operate in a world that is not perfect and they possess limited skills and knowledge so that particular values might have greater influence on their choices. The rational decision maker therefore, appears to be simplistic and seems to operate in an ideal world. Kim, Ferrin and Rao (2008) introduced the increasingly common form of business transactions executed through online means and investigated the decision making process in these circumstances. Such cases present even greater challenge during decision making, since the consumer to deal with product images and pictures as opposed to traditional face-to-face transactions where decisions are made about products that can be seen and felt. These researchers argued that consumers act on information that is not usually complete and which may be far from perfect. Consequently, they are usually faced with a certain degree of risk and uncertainty while they make their purchasing decisions. However, in the context of online buying, consumers are not only concerned about the risk; the perceived benefit gives consumers motivation for purchase behaviour. Other researchers have combined the all the risks and benefits and have come up with a valence framework that holds the assumption that consumers consider products to have both negative and positive attributes. The customers therefore, make decisions that will enable them maximize the net valence that results from the negative and positive attributes of the decision. To this extent, consumers transacting online purchases rely on rational decision making to make the decisions to purchase a particular product from a particular website. But given the nature of online transactions, the decision to purchase may major rely upon the desire to conduct business in a convenient manner and the level of trust that the consumer has on a given website. The consumer has to give out a substantial amount of information and will only hope that they transaction will end successfully when the product is delivered. Decision making process will therefore aim at minimization of risk and innovativeness (Brosekhan & Velayutham, 2000). This therefore presents new challenges for the decision making models since the decision to purchase greatly relies upon emotional factors as opposed to the pre arranged sequence of events that should be followed during such decision making. Booth and Shephered (1988) said that the consumer’s decision making process is affected by cultural and economic factors, attitudes, emotions and values and even the consumers personality. Steenkamp (1996), on the other hand, identified that psychological, biological together with socio-demographical characteristics, cultural environment and economic factors influenced the purchasing decision making process. Similar findings were reported by Kotler (1994). These researchers mention a variety of factors that will influence the consumer in the real world. They bring the understanding that consumer behaviour cannot be modelled and governed based on strict sequences of events. In the real world, decision makers have to consider several other factors and their decisions are bounded by particular circumstances that are as diverse as the decisions themselves. Conclusion It is true that rational models propose useful guidelines and suggestions that should help individuals make sound decisions. As has been seen in the discussion above, the rational model requires deep knowledge and awareness about the product and the environment where the decision is to be made. It also relies upon analyses and evaluations that help individuals decide on the best alternatives. While this is true, it is also true that people would find it very difficult to apply these suggestions in the real world. Individual may not have all the information or they may be restrained by their financial capabilities, cultural expectations, attitudes etc so that their ultimate choice would not exactly be the best alternative. Individuals may also be responding personal needs and interests or they may choose a particular product because it is cheaper. The bottom line therefore is that although these models could be used as guidelines, they may not be entirely applicable in a non ideal world and are a poor guide to what people actually do. List of References Booth, DA & Shepherd, R, 1988, Sensory Influences on Food Acceptance: the Neglected Approach to Nutrition Promotion in British Nutrition. Foundation Nutrition Bulletin, 13:39-54 Brosekhan, AA & Velayutham CM, 2000, Consumer Buying Behaviour – A Literature Review, IOSR Journal of Business and Management (IOSR-JBM), ISSN: 2278-487X, pp. 8-16 Doyle, J, & Thomason, RH, 1999, Background to qualitative decision theory. AI Magazine, 20: 55-80. Eisenfuhr, F, 2011, Decision making, New York, NY: Springer Erasmus, AC, Boshoff, E & Rousseau, GG, 2001, Consumer decision-making models within the discipline of consumer science: a critical approach, Journal of Family Ecology and Consumer Sciences, 29: 82 – 90 Hayes-Roth, B, 1982, Opportunism in consumer research, Advances in Consumer Research, 9: 132-135. Haubl, G & Trifts V, 2000, Consumer Decision Making in Online Shopping Environments: The Effects of Interactive Decision Aids, Marketing Science, 19 (1): 4 – 21 Jones BD, 1999, Bounded rationality, Annu. Rev. Polit. 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