QM_Decision Analysis

What is decision making under certainty?

• Decision maker knows with certainty the consequences of every alternative or decision choice

• Decision maker does not know the probabilities of the various outcomes

• Decision maker knows the probabilities of the various outcomes

What is decision making under uncertainty?

• Decision maker knows with certainty the consequences of every alternative or decision choice

• Decision maker does not know the probabilities of the various outcomes

• Decision maker knows the probabilities of the various outcomes

What is decision making under risk?

• Decision maker knows with certainty the consequences of every alternative or decision choice

• Decision maker does not know the probabilities of the various outcomes

• Decision maker knows the probabilities of the various outcomes

What is the maximax criterion?

• Used to find the alternative that maximizes the maximum payoff

• Used to find the alternative that maximizes the minimum payoff

• A weighted average compromise between optimistic and pessimistic

What is the maximin criterion?

• Used to find the alternative that maximizes the maximum payoff

• Used to find the alternative that maximizes the minimum payoff

• A weighted average compromise between optimistic and pessimistic

What is the criterion of realism?

• Used to find the alternative that maximizes the maximum payoff

• Used to find the alternative that maximizes the minimum payoff

• A weighted average compromise between optimistic and pessimistic

What is the equally likely criterion?

• Considers all the payoffs for each alternative

• Based on opportunity loss or regret

• Used to find the alternative that maximizes the maximum payoff

What is the minimax regret criterion?

• Considers all the payoffs for each alternative

• Based on opportunity loss or regret

• Used to find the alternative that maximizes the maximum payoff

What is the expected monetary value (EMV)?

• The alternative with the highest expected monetary value

• The cost of not picking the best solution

• The long run average return if we have perfect information

What is the expected value of perfect information (EVPI)?

• The alternative with the highest expected monetary value

• The cost of not picking the best solution

• Places an upper bound on what you should pay for additional information