Date of this Version
Cornhusker Economics (October 5, 2022)
Agricultural Economics, University of Nebraska-Lincoln
Decision scientists have many algorithms for making decisions. These algorithms can be qualitative and subjective, such as following a 7-step process, to highly quantitative procedures like minimax regret, or linear programming. These techniques are very different from each other, but in one way they are very similar; they never, ever suggest the manager become emotional and use past decisions to guide the future.
Past decisions and events should guide decision-making. They help managers assign probabilities as well assessing performance. Viewing these events and situations as permanent paths is where sunk costs become problematic.
Includes discussions of four scenarios.