Decision Making Conditions

DECISION MAKING CONDITIONS
The conditions for making decisions are made under certainty, uncertainty and risk are based on our feelings and our experiences.
1. Certainty
We experience certainty about a specific question when we have a feeling of complete belief or complete confidence in a single answer to the question.
Decisions such as deciding on a new carpet for the office or installing a new piece of equipment or promoting an employee to a supervisory position are made with a high level of certainty.
While there is always some degree of uncertainty about the eventual outcome of such decisions there is enough clarity about the problem, the situation and the alternatives to consider the conditions to be certain.
2. Uncertainty
A decision under uncertainty is when there are many unknowns and no possibility of knowing what could occur in the future to alter the outcome of a decision. We feel uncertainty about a situation when we can't predict with complete confidence what the outcomes of our actions will be. We experience uncertainty about a specific question when we can't give a single answer with complete confidence.
Launching a new product, a major change in marketing strategy or opening your first branch could be influenced by such factors as the reaction of competitors, new competitors, technological changes, and changes in customer demand, economic shifts, government legislation and a host of conditions beyond your control.
These are the type of decisions facing the senior executives of large corporations who must commit huge resources.
3. Risk:
A situation in which the manager is able to estimate the likelihood (probability) of outcomes that result from the choice of particular alternatives. A far more common situation than decision making under certainty is one of risk, under risk, managers have historical data from past personal experiences or secondary information that lets them assign probabilities to different alternatives.