Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Which of the following cases is an example of (a) rational decision making (b) disjointed incrementalism or ‘incremental decision making’ by Lindblom (c) satisficing .
1. In the face of an anticipated deficit, the governor and his budget bureau are deliberating on possible across the board budget cuts of 4%, 6% or 8% of last year’s allocations to all state agencies and departments. They finally decide on 6% because this will come closest to eliminating the deficit, while not risking as much political criticism/hostility as the 8% cut.
2. You are looking for a good used car, and have a budget of M2,500.00. You make your selection by identifying several reputable dealers and examining and pricing out the models you like. Each model you look at is either too expensive, or it has some critical defects. Eventually you find a car “you can live with”, and though it is priced are M3, 000.00, after bargaining the dealer agrees to sell for M2,750.00, and you buy.
3. A neighbourhood organization is looking for a site for its proposed community centre. It identifies all the available locations in the neighbourhood that are large enough parcels to hold a building fitting the centre’s program and activities, and compares them for cost, relevant physical characteristics, and accessibility to neighbourhood residents. It chooses the site that scores highest on a weighted score that reflects the selection committee’s estimate of the relative importance of each of these considerations.
4. The city is looking for a new city manager. A search committee of elected and senior appointed officials draws up an advertisement specifying the appropriate qualifications, and advertises nationwide. Out of all the applicants, a short list is drawn-up, who are the interviewed, but each of these lacks one essential qualification. However, finally the committee chooses the person who seems to come closest to meeting their specifications.
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