Differences between decision-making under uncertainty and decision-making under risk

Differences between Decision-making under Uncertainty and Decision-making under Risk
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Decision-Making under Uncertainty and Under Risk
A decision is a conclusion of a process whereby the individual involved has the task of choosing between two or more actions in the effort to achieve an optimal strategy. Managers indulge in various decision-making processes for the purpose of achieving different objectives. The idea of working to attain a certain goal improves the motivation and concentration of the professionals, leading to efficiency and making of the right decisions (Singh, 2014). In this case, the managers have to make distinct conclusions on what should or must be done in a given situation. The decision making is a process of arriving at an optimal strategy through the implementation of action on the available alternatives. Hence, managers can choose between working with either the decision-making under uncertainty or the decision making under risk since the types have various differences in process and method of implementation of the chosen option from the available alternatives.
Decision-making under uncertainty
In the decision-making under uncertainty, the manager works without any bit of information about the outcome or any single chances of anticipation in the ultimate result. In this case, the manager does not have a line of action in respect with the goal since the goal cannot be predicted (Singh, 2014). The individual in the process of choosing the appropriate option is said to be working in the conditions of uncertainty. The manager does not have any information that can help in the creation of analysis for the decision in question and the only option is to work knowing that they do not have the opportunity of predicting outcomes (Singh, 2014). Although the decision making under uncertainty is complicated, managers have the opportunity of following various criterions as basis for the decision making process.
The different criteria involve different options. First, managers can maximize the maximum possible pay off (Singh, 2014). In this case, the manager works with an anticipation of getting the best result from the chosen decision. The individuals involved are optimistic regardless of the existence of uncertainty. On the other hand, the managers can maximize the minimum possible pay off, whereby the manager believes that anything including the worst can happen from the chosen option (Singh, 2014). Managers can minimize the maximum possible regret to avoid choosing the wrong direction in the ultimate decision making. The managers try to keep the right track to avoid regrets (Singh, 2014). Due to a lack of information for analysis, managers assume the equal likely probability for each state of nature in the process and this criterion is insufficie...