Chapter 15
Risk Analysis: Walking Through the Fog
In This Chapter
Playing with odds
Making decisions with uncertain outcomes
Developing decision-making criteria
Determining the value of information
Incorporating risk preferences
Bidding to win
You may remember Mattel’s Magic 8 Ball. It’s a black globe that answers questions about the future. You hold it, ask a question, turn it over, and in a window the answer to your question appears. The answer I always seem to get is “Reply hazy, try again.” Such is the future — hazy. Or consider Yogi Berra’s contribution to planning, “If you don’t know where you’re going, you might wind up someplace else.”
To this point, I’ve examined decision-making in a certain or known environment. However, frequently the consequences or payoffs resulting from a decision or action are uncertain, depending upon factors outside your control. Therefore, it’s essential ...
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