Judgement In Managerial Decision Making

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As per the table below, the graduate student can make a choice based on its advantages and salary for the best job offer. A job may have a high salary but other factors are not favorable to the candidate’s welfare. Sometimes, other factors can be favorable but the income is low. A job seeker can use game theory to make best decision when this kind of situation confronts him/her. In this case, the candidate is considering four factors. The factors affecting candidates choice for a job offer have been rated on a scale of 0 – 10, larger number being better.

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Table 1: Available job offers’ factors and their rating in a scale of 1-10

Rating on a scale of 0 – 10, larger number being better Total
Job Salary Attractiveness of Job Ease of Commuting Quality of Life Children’s School
1 $48,000 8 4 7 6 25
2 $52,000 7 2 7 6 22
3 $50,000 8 6 4 4 22
4 $51,000 6 2 5 5 18
  1. Basing on the available job offers and their corresponding benefits, there are dominated alternatives. Considering the total benefits of each job offers, Job 4 is dominated by job offer 1, 2 and 3 since it is having the lowest rating of benefits to the candidate when the salary is not considered. Job 2, 3 and 4 are dominated by job offer 1. Job offer 1 has a rating of 25 points in total against 22, 22 and 18 for job offers 2, 3 and 4 respectively. This means Job offer 1 is better than the other offers regardless of its small salary (Dixit, and Nalebuff, 1991).
  2. When the given tradeoffs are applied to the matrix of ratings used by the candidate, job offer with highest returns should be chosen. First, row maxima (Green) and minima (Red) have been highlighted before application of the tradeoffs. This helps to know the range of rating of available offers.

Table 2: Job offers with factors that affect candidate’s decision with maxima and minima of each row highlighted

Rating on a scale of 0 – 10, larger number being better Total
Job Salary Attractiveness of Job Ease of Commuting Quality of Life Children’s School
1 $48,000 8 4 7 6 25
2 $52,000 7 2 7 6 22
3 $50,000 8 6 4 4 22
4 $51,000 6 2 5 5 18

Factors which have ratings less than the ones given in tradeoffs cannot improve job offer’s optimal strategy (Gibbons, 1992). If rating of a given factor is reduced from the current value to a rating which is given for tradeoffs, the salary increases by a given value. The following workings based on the available tradeoffs will result in the final salary.

Job offer 1: Job attractiveness is at a rating of 8, it can go down to 7, hence, salary increases by $5000, ease of commuting cannot change because it has less rating than the given for tradeoffs, quality of life goes down to 4 resulting in salary increase by $5000 and children’s school goes down to 4 hence the salary increase by $3000. The final salary for job 1 will be:

  • 48000+5000+5000+3000= $61000

Job offer 2 will have the following salary after the tradeoffs. Attractiveness of job and ease of commuting cannot reduce. Quality of life rating can reduce from 7 to 4 increasing salary by $5000 as Children’s school rating reduces from 6 to 4 which increase salary by $ 3000. The resulting salary will be

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  • $52000 + 5000 + 3000 = $ 60000

Job offer 3 will have the following tradeoffs. Attractiveness of job reduces from 8 to 7. This increases the salary by $5000 while ease of commuting reduces from 6 to 4 which increase salary by $1000. Quality of life and Children’s school rating cannot change. The final salary will be

  • $50000 + 5000 + 1000 = $56000

Finally, job offer 4 will have no tradeoffs because all the factors have lower rating than ones given for tradeoffs. The resulting tradeoffs matrix will be as follow:

Table 3: Job offers with the factors affecting student’s decision after tradeoffs. The matrix saddle point is at a rating of 2

These are on a scale of 0 – 10, larger number being better Total
Job Salary Attractiveness of Job Ease of Commuting Quality of Life Children’s School
1 $61,000 7 4 4 4 19
2 $60,000 7 2 4 4 17
3 $56,000 7 4 4 4 19
4 $51,000 6 2 5 5 18

After tradeoffs, the best choice for the candidate is Job offer 1. The salary has increased from $48000 to $61000 which is more than salary for other job offers. The job was initially having the lowest salary and the highest rating before tradeoffs. The offer is having the highest rating after the tradeoffs together with Job offer 3 which has a salary of $56000. Therefore, Job offer 1 will be the best choice for the candidate after tradeoffs. Job offer 4 is the worst choice for the student in terms of salary. The final salary is $51000 compared to $61000, $60000 and $56000 for Job offer 1, 2 and 3 respectively. Furthermore, the rating of this job is 18 which is average of all the offers after tradeoffs. The offer has lowest salary with poor rating. The poor salary in this offer can be attributed to poor initial rating in all factors which the student is considering. As a result, the tradeoffs which are given are not applicable to this offer.

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References

Dixit, A. K. and Nalebuff, B. J. (1991). Thinking Strategically: The Competitive Edge in Business, Politics, and Everyday Life. New York: Norton.

Gibbons, R. (1992). Game Theory for Applied Economists. Princeton, NJ: Princeton University Press.

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ChalkyPapers. "Judgement In Managerial Decision Making." July 29, 2022. https://chalkypapers.com/judgement-in-managerial-decision-making/.