Quantitative Analysis for Management, 13/e

3.2 Types of Decision-Making Environments

The types of decisions people make depend on how much knowledge or information they have about the situation. There are three decision-making environments:

• Decision making under certainty

• Decision making under uncertainty

• Decision making under risk

In the environment of decision making under certainty, decision makers know with certainty the consequence of every alternative or decision choice. Naturally, they will choose the alternative that will maximize their well-being or will result in the best outcome. For example, let’s say that you have $1,000 to invest for a 1-year period. One alternative is to open a savings account paying 4% interest, and another is to invest in a government Treasury bond ...