Engineering Decision Making and Risk Management

Chapter 1Introduction to Engineering Decision Making

Learning Objectives:

After studying this chapter, the reader will be able to do the following:

1. Identify and describe two types of decisions that engineers make (Section 1.2).
2. Classify the decisions that engineers make (Section 1.2).
3. Describe how optimization is related to decision making (Section 1.3).
4. Describe how problem solving is related to decision making (Section 1.4).
5. Explain why decision making is part of risk management (Section 1.5).
6. Identify problems that can occur in decision making (Section 1.6).
7. Identify the benefits of improving decision making (Section 1.7).
8. Describe a decision from three perspectives (Section 1.8).

1.1 Introduction

Why should engineers study decision making? What is engineering decision making?

People have always made decisions, but analyzing decision-making processes and developing better decision-making methods are more recent activities. Our ability to analyze decisions has increased as mathematics, especially the theory of probability, has developed. In the 1700s, Daniel Bernoulli analyzed risky decisions and described how the relative values of alternatives depend on the preferences of the decision maker (Bernoulli, 1954). Ramsey (1964) developed a theory for decision making based on probability theory and utility. von Neumann and Morgenstern (1944) formalized the theory of expected utility and the analysis of multiplayer games, which is now known as game theory. Early works ...