Making Decisions with Uncertainty

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Chapter 17: Making Decisions with Uncertainty

Most businesses are faced with the challenge of making decisions without full certainty they would bring the desired outcomes. However, there are approaches that these business can adopt cope with uncertainty and reach decisions that can profit them. When a product’s demand is not known, it leads to pricing uncertainty. Uncertainty is inescapable, and therefore, a firm should first collect more information about various market dynamics to deal with it. For example, when Best Buy did not know the rate of demand for its products, it hired experts to predict variables that could help it deal with the pricing uncertainty, such as the rates of holiday sales (Froeb, McCann & Ward, 2015). Also, Google predicts its internal markets to forecast the usage and demand. The US Military also understands that uncertainty cannot be eliminated, and therefore, advises organizations to learn to accept this fact and find ways to cope with it. This can be done by developing simple plans that are flexible and developing arrangements for likely eventualities. Businesses can use the difference-in-difference approach to gather and analyze information about a decision’s benefits and costs.

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