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A Primer on

DECISIóN hIG

How Decisioni Happen

James G. March

with the assistance of Chip Heath

The Free Press

New York London Toronto Sydney

THp FnsB Pnsss A Division of Simon & Schuster Inc.

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Copyright @ 1994 by James G. March

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Manufactured in the United States of America

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Library of Congress Catalogíng-ín-Publication

March, James G.

Data

A primer

, March; with

on decision making: how decisions happ en lJames G.

the assistance of Chip Heath. cm

bibliographical reference$ and index.

p.

Includes

ISBN 0-02-920035-0

l. Docision-making.

HD30.23.M369 tgg4

65 8.4 ' 03-dc20

[. Heath, Chip,

II. Titlo.

95-4414

.

CIP

Conte:nts

Acknowledgments v

Preface vii

-')

'

1,. Limited Rationality 1

The Idea of Rational Choice 1

Limited (or Bounded) Rationality

Theories of Attention and Search Risk and Risk Taking 35

2. Rule Following 57

I

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Decision Making as Rule Following 57 ,

Rules, Identities, and Action 59

Rule Development and Change 76

Appropriate Rules or Consequerttial Choice? 100

Itt

rtt

iv

Contents

3. Multiple Actors: Teams and Partners 103

Interpersonal Consistenry and Teams L04

Interpersonal Inconsistencies 105 Social Bases of Inconsistencies I\L

Uneasy Partners L20

4. Multiple Actors: Conflict and Politics I39

Decisions and Power I40 Decisions and Coalitions 151

Participation and l)ecision Instabilities 160

Single Actors and Multiple Actors I72

5. Ambiguity and Interpretation 175

Order and Ambiguity in Decision Making 175

Ambiguous Bases of Decision Making 180

Loose Coupling in Or ganizations I92

Garbage Can Decision Process 198

Decision Making and the Construction of Meaning

Ambiguity and Understanding 2I8

6. Decision Engineering 22I

207

Defining Decision Intelligence 222

Improving Adaptiveness 234

Using Knowledge 244

Creating Meaning 258

Notes 273

Additkmal Reading 275

Ittdr,r 2tl-1

Acknowledgments

rF his book is based on lecture notes from a course I have

I given at Stanford University for several years. The lectures

have profited from a steady flow of intelligent and enjoyable

students in the Stanford course. If there are ideas worth credit-

ing here, they deserve much of the credit. The book has been

written with the assistance of Chip Heath. Ffe made a rough

preliminary draft from my lecture notes and persuaded me to

undertake the writing. He has also provided comments on the chapters as they emerged. He should not have to take any re- sponsibility for any of it, but I am grateful for his help.

The essays in the book, like the lectures on which they are

based , &re, best seen as a secretary's

report to a collection of ex-

and collaborators with whom I have

worked on problems of decision making. Among the many, in

traordinarily able friends

addition to Chip Heath, I should like to cite particularly Ingmitr

Bjórkman, Nils Brunsson, Glenn Carroll, Soren Christcnscn,

Michael D. Cohen, Richard M. Cyert, Omar El Sawy, Jullc

Elworth, Lars Engwall, Martha S. Feldmor, Henrich ( ircvc,

.1. Richard Harrison, Kaj Hedvall, Scott R. Herriott, Kr"isli¿ttt Kreincr, Theresa Lant, Charles A. Lave, Danicl A. Lt:vilttltitl,

vi

Acknowledgments

Matheson, John 'W. Meyer, Stephen

Johan P. olsen, Jeffrey Pfeffer, Martin

Barbara Levitt, I)avid

Mezias, Anne Miner,

Schulz, W. Richard

Simon,

Scott, Guje Sevón, zur Shapira, Herbert A.

Jitendra Singh, Lee S. Sproull, Arthur L. Stinchcombe,

Suzanne Stout, Michal Tamuz, Risto Tainio, and'Xueguang

Zhou.

Despite

footnoted

this dependence on the work of others, the book is

only *páts"ly. While that may be taken as a manifes-

tation of laziness,it is also an effort to make the essays more a form of personal conversation than a scholarly treatise. Anyone

who knows the research literature will recogníze

speculations I

the influence

of innumerable colleagues make, but ¡f askecl foi a

I wil claim

additional reaclings

in the assertions and

reference for any speciflc one' I fear

only that I believe it. I have included a brief list of

at the end of the book.

áo rhis kind of thing is a lurury bestowed by

Foundation, the Stanford Graduate the Scandinavian Consortium for Or-

The ability to

support from the Spencer School of Business, and

ganizational

Itto,rght of

saying so.

Research. And by a wife, who certainly could have

better things for me to do but often refrained from

Preface

-ft his book is a primer, a little compendium of ideas for think-

I ing about how decisions happen. The ideas are not novel.

They are familiar to students of decision making and are elabo-

rated at length in the research literature. They are presented

here in their starkest, least elaborate form, a first introduction

'"fi:::ü;s

in the book areconcerned primarilywith how de-

cisions actually happen rather than how they ought to happen. They sometimes draw on theories that purport to say how deci- sions ought to be made, and the last chapter provides a few ob- servations on how intetligence is (ot is not) achieved through

decision making. For the most part, however, the book sticks to

a simple collection of ideas that might be useful in understand- ing decision making as we observe it and participate in it.

Understanding any specific decision in a specific situation rc-

quires a great deal of concrete contextual knowledgc-dct¿rils

about thé historical, social, political, and economic wtlrltls ¡irt r-

rounding the decision and about the individuals, orgitltiz:ttitlllli, and institutions involved. Such details are nclt prcscntetl irl tlris

book. There are,no stories of the rich dr¿rnlil of'tlccisitltt, ll()

ta

vll

viii

Preface

elaborations of history. The text tries to be faithful to what is

kno-wn about decision making as it actually takes place, but the focus is on ideas that can be used to understand decisions gen-

erally, not on the particular details of any particular decision. Chapter L examines ideas of rational choice, particularly lim- ited rationality. Chapter 2 considers ideas of identity, appropri-

ateness, and history-dependent rules. Chapters 3 and 4 look at multiple-person decision making, decisions made in the face of inconsistency in preferences or identities. Chapter 5 treats the

consequences for decision making of ambiguity in preferences,

identities, and experience. Finally, Chapter 6 considers the

prospects for decision engineering.

Underlying these clusters of ideas are several different per-

spectives on decision making, with numerous variations. Stu- dents of decision making draw from all the disciplines of social

science-anthropology, cognitive and decision science, eco-

nomics, organization studies, political science, psycholo

sociology. As ideas from those disciplines are woven into the story of decision making, new forms of old issues are encoun-

tered: issues of reason and ignorance, of intentionality and fate,

of coherence and conflict, of institutions, identities, and rules,

of learning and selection, of meaning and interpretation, of

{y,

and

preferences and obligations. Those topics will arise naturally in their places, and their de-

tails will not be anticipated here. It may, however, be useful to note four relatively deep (and not entirely independent) issues that persistently divide students of decision making:

The first issue is whether decisions are to be viewed as

choice-based or rule-based. Do decision makers pursue a logic of consequence, making choices among alternatives by evaluating their consequences in terms of prior preferences?

Or do they pursu e alogic of appropriateness, fulfilling identi-

ties or roles by recognizingsituations and following rules that

match appropriate behavior to the situations they en-

count er?

The second issue is whether decision making is typified

moro by clarity and consistency or by amhiguity ancl inconsis-

Preface lX

tency. Are decisions occasions in which individuals and insti-

tutions achieve coherence aqd reduce equivocality? Or are they occasions in which inconsistency and ambiguity are ex- hibited, exploited, and expanded?

The third issue is whether decision making is an instru-

mental activity or an interpretive activity. Are decisions to be understood primarily in terms of the way they fit into a prob-

lem solving, adaptive calculus? Or are they to be understood

primafily in terms of the way they fit into efforts to establish

individual and social meaning? The fourth issue is whether outcomes of decision process-

es are seen as primarily attributable to the actions of au- tonomous actors or to the systemic properties of an interact- ing ecology. Is it possible to describe decisions as resulting

from the intentions, identities, and interests of independent

actors? Or is it necessary to emphasize the ways in which in- dividu al actors, organ izations, an¿ societies fit together?

These issues are not resolved here, but they are exercised a bit.