Handbook of Decision Analysis, 2nd Edition

3Foundations of Decision Analysis and Analytics

Information is a source of learning. But unless it is organized, processed, and available to the right people in a format for decision making, it is a burden, not a benefit.

—William Pollard

CHAPTER MENU

• 3.1 Introduction
• 3.2 Brief History of the Foundations of Decision Analysis
• 3.3 Five Rules – Theoretical Foundation of Decision Analysis
• 3.4 Scope of Decision Analysis
• 3.5 Decision Analysis and Data Analytics
• 3.6 Taxonomy of Decision Analysis Practice
  • 3.6.1 Some DA Terminology
  • 3.6.2 Taxonomy Division—Single or Multiple Objectives
  • 3.6.3 Addressing Value Trade‐Offs and Risk Preference Separately or Together?
  • 3.6.4 Nonmonetary or Monetary Value Metric?
  • 3.6.5 Degree of Simplicity in Multidimensional Value Function
• 3.7 Value‐Focused Thinking
  • 3.7.1 Four Major VFT Ideas
  • 3.7.2 The Benefits of VFT
• 3.8 Summary
• Key Terms
• Acknowledgments
• References

3.1 Introduction

In Chapter 1, we state that decision analysis is a social–technical process to create value. In Chapter 2, we identify the challenges that decision‐makers face in making difficult decisions for organizations and stakeholders. We also discuss the decision traps, cognitive biases, and motivational biases faced by individuals and groups. Decision analysis is an operations research/management science (OR/MS) discipline that is designed to help decision‐makers faced with difficult decisions and multiple stakeholders with many (possibly conflicting) objectives, complex ...