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Optimal Decision-Making

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The question: "I would like to consider the question of optimal decision making in terms of making decision between two or more alternatives and the nature of two impediments faced in making the decision. Also, what are two common impediments to making optimal decision?"

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https://brainmass.com/psychology/cognitive-psychology/optimal-decision-making-507152

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There is a wide and intricate gamut of impediments that can affect decision making. With regards to most of our actions, especially ones involving decision making, we are governed by a need to reason in order to justify our actions. Unfortunately, the process of reasoning in itself can often be flawed as it is made up of both inductive and deductive reasoning, with the former being prone to considerable vulnerabilities. It is beyond this branch that sub-categories and specific forms of impediments can be analysed (Goldenstein, 2011).

The relationship of inductive and deductive reasoning on decision making can be considered complex since decisions are subject to diversification from an individual to individual basis, and even on matters of sub-factors that present the challenge of decision.

Inductive reasoning involves a probabilistic view of a subject or proposition. Rather than a case of absolute right or wrong; an argument is seen as being probable on grounds of how strong or weak it might be when it is presented - also seen as reasoning from a specific example and applying towards constructing a general proposal (Carlson, 2007). (Example: All Thai food that I have eaten contains shellfish. Therefore, all Thai food must contain shell fish, or the next Thai food dish I order will most likely contain shell fish.)

Deductive reasoning, addresses the inverse element in how it derives from general proposals and with a logically firm and certain conclusion; this is where a reasoning isn't based on how strong or weak it might be, but rather, on whether or not it is following a logical course of right or wrong - also seen as reasoning from the general being applied to a specific proposal (Steinberg & Mio, 2009, p. 578). (Example: All carnivores have short gastrointestinal tracts, and all herbivores have longer gastrointestinal tracts. Meanwhile, humans have neither long nor short gastrointestinal tracts. Therefore, humans are neither obligate carnivores, nor obligate herbivores.)

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Solution Summary

A discussion on the topic of optimal decision making between multiple alternatives and the nature of impediments faced in the decision making process; discussion lightly addresses topics of inductive reasoning and cognitive bias. Two impediments are considered for the discussion and an example is also offered to demonstrate some of the points discussed.

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You are faced with a decision what size to build a production facility. You are given four choices:

1. Do not build a production plant. This will not cost any money and will not generate any profit.
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3. Build a medium sized production facility. This will generate a profit of $10 million in a favorable market and lose $2 million in an unfavorable market.
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b) Determine the optimal strategy (what size facility to build if any) and its EMV. (10 points)

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