Question

You and your friend want to see a certain movie [assume that you can go to movie theatres] and are trying to decide where to go see it (you have identified the problem), and you decide to work through the Rational Decision Making Model to decide:
Part1: List and define 3 decision criteria, and give them weights (should add to 100%)
Part2: Generate 3 possible alternatives of theaters to go to.
Part3: Evaluate each alternative.
Part4: Compute and choose the best/optimal alternative.

Hint: Show that you know what to do at every step!

Answer 1

Though everyone makes decisions, not everyone goes about the process in the same way. In fact, not everyone even uses a process to make decisions. Here we will focus on rational decisions-making model.The rational decisions-making model assumes decisions are based on an objective, orderly, structured information gathering and analysis. The model encourages the decision maker to understand the situation, organize and interpret the information, and then take action When a consumer is thinking about buying a product, he wants to maximize his benefits and minimize cost.

Assuming that you can go to movie theatres with your friend to see a certain movie and trying to decide where to go with the help of Rational decisions-making model. Following are steps in rational decision making model.

1) Identify the problem : Identifying a few possible courses of action is the first step involved in the rational decision-making process. The bounded rationality framework contends that individuals make decisions under conditions of certainty.

The problem is to decide where to go see a movie. If you consider your own personal choices, you will probably find that they are quite complex. You are balancing what you want right now with options you want to have in the future. You probably value the people around you - friends, family, neighbors - and you may consider the impact that your choices have on them.You have decided to go to watch a movie with your friend but problem is where to go to watch it.

2) Establish the Decision Criteria and weigh them. : In this step, the decision maker needs to determine what is relevant in making the decision. Here, what is it that you look for, when you decide to watch movies, because watching movies is an expensive affair these days. So, following are the criteria for watching the movie in a theater with added percentage.

a. The big screen: There something to be said about watching visual storytelling on a three-story screen, particularly when the film really takes advantage of the format. (50%)

b. People everywhere : A group of people laughing together simultaneously triggers a feeling that you should laugh, too; during a suspenseful moment, you can feel dozens of strangers suck in their breath together. Even if you are surrounded by the same friends who are always on your couch, by going to the theater, you're refreshing a familiar social setting. (20%)

c. Focus: In your own home, there are too many things. Some of these things are family members who talk to you out loud, and some of these things are phones, computers, pets, and the temptation to get up and recheck the fridge every 20 minutes. In the movie theater, all you have is your chair, and snacks you brought, and the movie you're there to watch. (30%)

3. Generate 3 possible alternatives of theaters to go to.

a. Whether you will watch the movie in theater with your friend

b. You will wait for it to be released on Netflix or on TV

c. You will wait for movie until you can buy the DVD.

4. Evaluating each alternative.

A) Now our first alternative is to go to theater with your friend. If you don't see it with the theater energy, you will miss the full intended experience. The VR experiences, improvements to 3D to 5D and other new gimmicks designed to get us in the theatre. If we consider only the monetary costs of your choice, a movie ticket might cost $10 and you will only be able to see that movie one time.

B) If you wait, you can probably watch it as part of your monthly Netflix or cable subscription without spending any more than you would spend without watching the movie.

B) If you will wait for it for a longer time to buy the DVD and watch as many times as you want. But this is not economically a good decision because here you to loose $5 to $20 and need to wait also.

5. Computing and choosing the best/ optimal alternative: As a consumer, you are making an economically rational decision about the cost and benefit. Why would you pay $10 to watch the movie in the theater? You might want to see it right away, when it is only showing in the theater. You might want the theater experience, with big screen and high quality image and sound. You will make a decision that is economically rational, based on the following considerations. '' Is the benefit and enjoyment that I get from seeing the movie in a theater worth the $10 cost?

It is important to understand that this assumption creates a link between the cost of a product and the degree to which a consumer will want to buy it. So in $10 we get the best experience of watching movie with my friend in a theater. Watching from the comfort of your own home is ideal but going the theater makes you remember the movie more and enjoy the experience itself.