There are many ways to make decisions, and it’s interesting to recognize how we do it. These 2 ways are interesting to have present in the way you build your habits about decision making in front of uncertainty.
Normative theory
It outlines how decisions should be made to achieve optimal outcomes, assuming rational behavior and access to complete information.
It focuses on ideal models, like utility theory, where choices maximize expected value or benefit.
Example: a financial investor choosing between stocks. S/he calculates the expected returns and risks for each option and select the one with the highest expected return, assuming rational behavior and perfect information.
Stopping Strategy
It refers to the rule or criteria used to decide when to stop gathering information or evaluating options and make a decision.
This can involve thresholds, such as selecting the first option that meets a specific standard or stopping after a set number of evaluations.
Example: A hiring manager interviews candidates and decides to hire the first one who meets all the job requirements.
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