Hello Students, welcome to the course on Decision Analysis.

In this short video

we will learn the basics of decision and its analysis.

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Decisions can be analysed based on how they actually happen or, the way it has
to. The former is descriptive pursuit' and the latter, normative pursuit'. Analysis
of consumer behaviour in a typical supermarket is descriptive, as it explains the
way a decision is taken. Whereas a strategic decision taken using say, cost volume
analysis is normative, for it follows a norm, a process. In this course, we will focus
more on normative decision making. However, we will spend sometime in
descriptive decisions also, more to understand the common mistakes and pitfalls.
But, why should there be a difference between how we decide and how we
should? The answer for this is in human anthropology and our brain functions.
We will learn about these in a different lecture.

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You are on your way to work. You notice a damaged road divider threatening the
road users. You decide to set it right. You stop and open your door without
thinking about the motorbike overtaking you. Sorry, you mention and proceed to
set right the divider. All done well, but you wish to inform the traffic police about
the issue, but can not find him nearby. He is busy managing the traffic right at the
middle of the junction. Back in the car you appreciate yourself for the good
gesture, proceed to work. This short event can be depicted using a simple venn
diagram for our discussion. A thought, an action, their combination and their
absence. Can you figure out which event depicts which part of the diagram?
Region 1 is action without thought, your urge to open the car door without
looking back. Region 2 is thought without action, your wish to inform the cop in
vain. Region 3, the no thought no action event, your self talk about your good
gesture. Region 4, the actional-thought by which you set right the divider. This is
our subject matter. What constitutes a high quality actional-thought is what we
will learn through this course.

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Our actional-thoughts are driven by our preferences and constrained by the
uncertainties surrounding us. Our choices are based on the resources we are
endowed with. Preferences are personality driven. Uncertainties are external to
us. Selecting the best alternative in this premises of preferences and
uncertainties is decision making. Let us take a simple process to understand this,
your commuting decision to your workplace. You have the choice of taking a
public transport, bike or drive. Your preferences may be, speed, comfort or
frugality. The uncertainties are the rush in the public transport and the traffic.
You will decide on the alternative that best meets your preference while
considering the uncertainties at that point in time. Now the next question comes.
How do we qualify a decision as good or bad?

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Before we qualify a decision, let us understand what is a decision? A decision can
be defined as a choice between two or more alternatives that involves an
irrevocable allocation of resources. That means, a mental commitment or
intention is not a decision. If you claim to have decided to diet, you have not
allocated any resource, hence it can not be considered as a decision. The
moment of decision is the moment when changing your mind costs you
something. The resource can be anything finite. For example, if you decide to diet
and order a bowl of vegetable salad, you have made a decision. Cancelling the
order will cost you money. Another example, if you commit to spend the
weekend with your family but end up attending the online lecture, you allocate a
precious resource, your time. Hence is a decision. Let us consider a third
example, you are on a hurry to a business meeting. On your way you notice a
senior woman waiting to cross the road. What is your choice? Help the lady cross
the road or proceed to your meeting? You proceed to your meeting praying to
the Lord to help the lady. Have you made a decision? No, because you have not
committed any resource. You were just indifferent to the difficulties of a senior
woman. This indifference pricks you and not the indecision.

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You have thrown a party at your home and enjoy the evening with alcoholic
drinks. Your friend at the end of the party has a choice to drive back under
influence or stay with you and get back home in the morning. What will be your
advice to your friend? Stay back, right? But despite your advice your friend
drives back the same night and reaches home safe. Will you consider your
original decision as wrong? Probably not. He is fortunate that he is safe. Suppose,
he stays back but still meets with an accident on his way in the morning, will you
reconsider your decision? Perhaps not. He is just unlucky. If you throw your next
party, will you change your advise to your friend? Does this not indicate that
there is no relationship between the quality of the decision and the quality of the
outcome? But, wait. Is this counter intuitive? Should we not be looking at the
result while making a decision then? Think. This is your homework. Take an
important decision you have made. Have you or others judged it based on its
outcome?

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But, wait. Is this counter intuitive? Should we not be looking at the result while
making a decision then? Think. This is your homework. Take an important
decision you have made. Have you or others judged it based on its outcome?