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Operations Management: Processes and Supply Chains, 12th Edition by Larry P. Ritzman, Manoj K. Malhotra, Lee J. Krajewski

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Decision Theory

Decision theory is a general approach to decision making when the outcomes associated with alternatives are often in doubt. It helps operations managers with decisions on process, capacity, location, and inventory because such decisions are about an uncertain future. Decision theory can also be used by managers in other functional areas. With decision theory, a manager makes choices using the following process:

  1. List the feasible alternatives. One alternative that should always be considered as a basis for reference is to do nothing. A basic assumption is that the number of alternatives is finite. For example, ...

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