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CMA Foundation · Fundamentals of Business Economics and Management · Decision-making - Types and Process

A manager at a Pune textile firm accepts the first supplier quotation that meets her minimum requirements instead of comparing every available supplier, because time and information are limited. This behaviour is best described by which concept?

The behaviour is satisficing under bounded rationality. Because time and information are limited, the manager accepts the first option that meets minimum needs rather than searching for the best one. Optimising would need full comparison of all suppliers, which she does not undertake.

  1. ASatisficing under bounded rationalityCorrect
  2. BOptimising under perfect rationality
  3. CGroupthink
  4. DEscalation of commitment

Explanation

Herbert Simon's bounded rationality says managers have limited time, information and processing ability, so they pick a satisfactory option rather than the best one. Optimising would require evaluating all suppliers, which the manager does not do. Groupthink and escalation of commitment involve group pressure and continued investment in failing actions respectively, which are not described.

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