Business Analytics Principles, Concepts, and Applications: What, Why, and How

G. Decision Theory

G.1. Introduction

Decision analysis involves a variety of methodologies that can be based on heuristics, principles, and optimization methodologies, all of which can aid decision-making. One common body of knowledge associated with decision analysis is referred to as decision theory. Decision theory (DT) is a field of study that applies mathematical and statistical methodologies to provide information on which decisions can be made. DT does not solve for optimal solutions like linear programming but instead is based on decision-maker preferences and principles to select choices and better satisfy needs, particularly for problem-solving environments. Before using these DT methodologies, one must know the elements of the DT ...