Rational decision-making

A rational decision-making model is a model that describes how individuals should behave in order to maximise outcomes.

Six-step rational decision-making model

1. Define the problem.
2. Identify the decision criteria.
3. Allocate weights to the criteria.
4. Develop the alternatives.
5. Evaluate the alternatives.
6. Select the best alternative.

Decision-making in practice is characterised by

• bounded rationality;
• common biases and errors;
• the use of intuition.

A bounded rationality is a process of making decisions by constructing simplified models that extract the essential features from problems without capturing all their complexity.

Intuitive decision-making is an unconscious process created without having a direct experience.