CHAPTER 19

Decision Analysis

LEARNING OBJECTIVES

This chapter describes how to use decision analysis to improve management decisions, thereby enabling you to:

1. Make decisions under certainty by constructing a decision table.
2. Make decisions under uncertainty using the maximax criterion, the maximin criterion, the Hurwicz criterion, and minimax regret.
3. Make decisions under risk by constructing decision trees, calculating expected monetary value and expected value of perfect information, and analyzing utility.
4. Revise probabilities in light of sample information by using Bayesian analysis and calculating the expected value of sample information.