Administrative Model of Decision Making

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  • 0:00 The Administrative Model
  • 2:25 Five Steps of Making a…
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Lesson Transcript
Instructor: Olga Bugajenko

Olga is a registered PRINCE2 Practitioner and has a master's degree in project management.

Do you always consider all possible alternatives before making a decision? Learn more about the concept of limited rationality and its consequences with the help of the administrative model of decision making.

The Administrative Model

In the foundation of the administrative model of decision making lies the belief that decision makers often settle for a less than ideal solution because of time and motivation shortages. Instead of seeking the best solution that maximizes the value of the decision, the decision maker accepts the first available 'good enough' alternative producing a value above the minimally acceptable. The concept of settling for a less than perfect solution is called satisficing.

Because of the limited rationality of the decision maker, the model is also known as the bounded rationality model. The limited rationality entails that the decision maker has a limited number of criteria and considers a limited number of alternatives. The degree to which the choice will be limited will depend upon the values and skills of the decision maker. This model is based on ideas first expressed by Herbert Simon. He called the decision maker with limited rationality an Administrative Man and opposed him to a perfect Economic Man, who is takes into consideration all possible criteria and evaluates all possible alternatives.

In our busy everyday lives, we often employ such approaches without thinking twice. Imagine yourself sitting in the office on a weekday afternoon and suddenly realizing you have to attend a birthday party later the same day. Had you remembered about the party earlier, you might have spent the whole Sunday browsing the shops in search of a perfect gift. Now, your options are very limited. You have only one shop next to your office and quickly browse the shelves on your way to the party, settling for the first gift that remotely matches your friend's interest. Will it be the best gift your friend will receive that day? Unlikely. Did you save yourself from the embarrassment of showing up empty-handed? Definitely.

The main drawback of this approach is, of course, a lowered quality of the final decision. However, this model also has a number of benefits. Under certain circumstances, these can well compensate for the loss in quality. First, this approach requires less time to reach a decision. In a situation where time is costly or unavailable, settling for a 'good enough' option can be an efficient strategy. Secondly, reaching for an ideal solution often means more resources have to be dedicated for information gathering. So a solution reached with the administrative model in mind is likely to be cheaper.

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