Data Mining: Know It All

Chapter 6. Further Techniques in Decision Analysis

This chapter presents techniques in the use of decision analysis. Most individuals would not make a monetary decision by simply maximizing expected values if the amounts of money involved were large compared to their total wealth. That is, most individuals are risk averse. So, in general, we need to model an individual's attitude toward risk when using decision analysis to recommend a decision. Section 6.1 shows how to do this using a personal utility function. Rather than assess a utility function, a decision maker may prefer to analyze the risk directly. In Section 6.2, we discuss risk profiles, which enable the decision maker to do this. Some decisions do not require the use of utility functions ...