In their text, Kunreuther, Hoch & Kureuther (2005) present a range of ways through which researchers use to resolve multistage problems by applying dynamic programming models which offer the highest chances of success. One of the methods under dynamic programming models is optimal dynamic decision analysis. There are some ways in which I would apply the optimal dynamic decision analysis for predicting the future impact of today’s decisions. Primarily, optimal dynamic programming models are founded on two fundamental assumptions regarding problem-solving (Kunreuther, Hoch & Kureuther, 2005, p. 48). The first assumption is to complete forward planning. This assumption asserts that for decision-makers when maximizing the aggregate utility over a horizon, they are presumed to look ahead to all future times and expect all potential decisions and outcomes. The second assumption is optimal learning, which holds that decision-makers entirely use past information in updating both present beliefs as well as future predictions.
Therefore, based on the two assumptions, there are two ways I would apply optimal dynamic decision analysis in predicting the future effect of today’s decision. First, I will choose the choice which maximizes utility in the long-term, not just in the present. This will help me predict the possible outcome of the decision made now, in the future. Also, I would use past information to predict the potential outcome of the decision I make today. Previous experiences will guide me in predicting the impact of the present decision in the future.
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Similarly, the conclusions reached at the last pages of chapter 3 would improve my decision-making. I would use my intuitions in making dynamic decisions by seeking answers to dynamic decision problems from my inner guidance system. According to Elbanna & Fadol (2016), an intuitive decision-making process would help me consider the whole picture and use my feelings and emotions to find solutions to my decisions.
References
Elbanna, S., & Fadol, Y. (2016). The role of context in intuitive decision-making. Journal of Management & Organization , 22 (5), 642-661.
Kunreuther, H. C., Hoch, S. J., & Kureuther, H. C. (2005). Wharton on Making Decisions . John Wiley & Sons.
