Decision analysis

Decision analysis is a systematic, quantitative and visual approach to addressing and informing complex decisions. This approach involves much more than just the building of decision trees. Decision analysis includes a range of procedures, methods, and tools for identifying, clearly representing, and formally assessing important aspects of a decision, for prescribing a recommended course of action by applying the maximum expected utility action axiom to a well-formed representation of the decision, and for translating the formal representation of a decision and its corresponding recommendation into insight for the decision maker and other stakeholders.

Overview

The decision analysis process involves a set of techniques that allow consideration of various aspects of decision making, including risk, uncertainty, objectives, alternatives, and trade-offs. These techniques are used to evaluate and compare the expected outcomes of alternative actions, and to identify the most desirable actions to implement.

Steps in Decision Analysis

The process of decision analysis includes the following steps:

1. Identify the decision problem
2. Specify the objectives
3. Identify the alternatives
4. Identify the uncertainties
5. Specify the consequences
6. Construct a decision tree
7. Evaluate the decision tree
8. Make the decision

Applications

Decision analysis has been used in a wide variety of applications, including business, medicine, engineering, public policy, and environmental science.

See Also

• Risk Analysis
• Decision Tree
• Decision Theory
• Decision Support Systems

References

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