Quantitative Analysis for Management, 13/e

Summary

Decision theory is an analytic and systematic approach to studying decision making. Six steps are usually involved in making decisions in three environments: decision making under certainty, uncertainty, and risk. In decision making under uncertainty, decision tables are constructed to compute criteria such as maximax, maximin, criterion of realism, equally likely, and minimax regret. Methods such as determining expected monetary value (EMV), expected value of perfect information (EVPI), expected opportunity loss (EOL), and sensitivity analysis are used in decision making under risk.

Decision trees are another option, particularly for larger decision problems, when one decision must be made before other decisions can be made. For example, ...