Return on Software: Maximizing the Return on Your Software Investment

Summary

Decision making under uncertainty is used when it's not possible, or practical, to assign probabilities to the outcomes. When probabilities can be assigned, the decision making under risk techniques in the previous chapter should be used. The chapter covered the following major points:

• The payoff matrix shows all of the possible outcomes that need to be considered. One axis of the matrix is a list of the mutually exclusive alternatives. The other axis of the matrix is a list of all the different states of nature. Each cell in the matrix is filled with the PW(), FW(), or AE() of that alternative under the corresponding state of nature.

• The Laplace rule, sometimes called “the principle of insufficient reason,” assumes that each state of ...