Normative target‐based decision making | Zendy

Abbas Ali E. | Zendy; Matheson James E. | Zendy

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Normative target‐based decision making

Author(s) -

Abbas Ali E.,

Matheson James E.

Publication year - 2005

Publication title -

managerial and decision economics

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.288

H-Index - 51

eISSN - 1099-1468

pISSN - 0143-6570

DOI - 10.1002/mde.1234

Subject(s) - normative , delegation , normative model of decision making , maximization , computer science , decision analysis , expected utility hypothesis , decision theory , operations research , mathematical economics , economics , microeconomics , mathematics , political science , management , law

This paper relates normative expected‐utility decision making to target‐based decision making, and introduces a new quantity, the aspiration equivalent. We show that using the aspiration equivalent as a target provides a new method for choosing between lotteries that is consistent with expected‐utility maximization. Furthermore, we show that the aspiration‐equivalent target provides a win–win situation for executive–manager delegation. This result furnishes a new link between normative decision analysis and target‐based decision making. Copyright © 2005 John Wiley & Sons, Ltd.

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