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Steps or process of decision making

Steps or process of decision making

Step 1: definition of the problem: identifying the problem of choice and then describing it is the starting point of making decisions. As a part of description, alternative solutions to a problem have to be listed; the structure or ordering of the alternatives is important.

Step 2: collection of data: description of an economic problem has to be followed by the analysis. For analysis, data must be collected. Data here means available facts and figures. Data can be collected from a number of sources like handbooks, public records, government bulletins, trade journals, official reports, personal interview etc, the problem is data may not be always available. Available data may not be usable. Available and usable data may not be always reliable.

Step 3: formulation of a model: in describing the problem, the objectives and alternatives are developed. The relation between objectives and constraints must be explicitly stated so that data can be meaningfully used to analyze the outcome of alternative courses of action used to analyze under different decision environment. Such statement of relations, taking care of (a) the data environment and (b) the system environment is called a model. Model is an analytical aid for making decisions for making decisions under different situations.

Step 4: evaluation: initially we formulate models in the abstract symbolic world. Then we must evaluate it to see how far the model represents conditions of the real world. This is done by considering the realistic elements in the underlying assumptions of the model. Sometimes, take care of varied decision environment, decision may not be taken.

Follow up action: decisions or no decisions, the decision maker has to plan follow up strategies and actions; he has to anticipate reactions (moves and counter moves) or other who are likely to be affected by his decisions. In that light, he has to make short run (immediate) and long run (remote) decisions. Decision making is a continuous process; it has got a never ending sequence, provided we realize that problem includes a decision which creates new problem, which calls for a new decision and so on. 

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