Conditions Under Which Decisions Are Made

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Conditions under which decisions are made are as follows:
Certainty
This is when individuals are informed about a problem, alternative solutions are obvious and the likely of each solutions are clear. With this condition you have everything under control as you know that should something happen, you already have measures in place to take care of that situation. An example is in the case whereby you are involved in a car accident, say when you take insurance for your car you add the option of being given a courtesy car while your vehicle is being fixed. In that way you already have measures in place knowing that should you be in an accident you will have an alternative transport whilst your car is being fixed. Also when you buy a TV, you are usually given one year guarantee and you can get more years at an extra cost. In this instance you know that should the year be over and you had added two years more, and your TV has a problem maybe in the second year, you can take it back as it will still be under guarantee because you would have added more years to cover it. Risk

This is when individuals can define a problem, specify the probability of certain events, identify alternative solutions, and state the probability of each solution leading to the desired result. Like in the case of construction, the construction cost overrun risk has a possibility that during the design and construction phase, the actual project costs will exceed projected costs as a result of weather, supplier’s shortage, labour and subcontractor performance. In this case the probability that this will happen will be dependent on past weather records, and experience of the contractor. A decision is made under risk when a supervisor or superior can list all possibilities of outcomes with the decision that has been made and state the probability of each outcome. There are two types of probabilities, there is an objective probability whereby the supervisor or manager assigns probability based on...
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