Term
What is uncertainty:
-Incomplete knowledge about something-event, phenomenon, process, future outcome or something in the past that has not yet been revealed fully
-degree of U; know nothing or know almost everything |
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Definition
-Related words; chance, likelihood, probability, risk, hazard, random, stochastic, odds
-What are the causes of U
1/Ignorance: thing not understood in sufficient detail
2/incomplete information : technically possible to get, due to restrictions in funds,/time
3/inability to predict the move of other parties involved ; final outcome dp on joint results on actions taken by competing parties ( economic competitors or opposing teams )
4/measurement errors ; mistakes or inaccuracies the measuring instrument |
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Term
| Uncertainty in the context if DM |
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Definition
-usually U about outcomes, I.e. If u do X rather than Y , bcse of factors that u do not know enough about / beyond ur control.
-Daellenbach distinguishes btw DM in a situation involving complete U or involving a risk :
a) U implies that you 1)know what possible outcomes might be but 2) no info about the likelihood of each
B) risk implies knowledge about probability of each outcome
Here will cover approaches to analysis decisions where no knowledge of the probability of the diff outcomes . |
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Term
| Game theory; uncertainty -one decision and one criteria - used for U about OUTCOMES -offers a number of strategies that reflect different attitudes to uncertainty |
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Definition
1/-identify possible states of nature
-calculate possible environmental scenarios
-attribute a single payoff or score
( " desirability score" )to each outcome . This gives u 4 scenario dependent payoffs
2/ strategies for making a choice & this will dp on their attitude to risk :
a)maximax strategy -pick option that gives the maximum of the maximum payoff -strategy for the optimistic or risk prone decision makers
b) maximin; best ( or maximum ) of the minimum payoff -for pessimist or risk averse decision makers as assumes that whatever site u choose the worst will happen
c)minimax regret; derive a regret matrix from ur payoff matrix I.e. calculate amount of regret then minimise the maximum amount if regret that could occur given ur choice
-the aim is to minimise disappointment or criticism of a decision after an event. |
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Term
| Shortcomings of game theory |
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Definition
Two main ones
1/real decisions involve many criteria whereas this approach is based on a single payoff score
-to overcome this can convert a set of performance ratings into a single score using preference scores and criterion weights or direct judgement
-the effect of bringing in uncertainty is that the performance ratings depend on future state of nature in addition to the option chosen
2/ one of its defining features is that it does not incorporate any information you may have about likelihood of the different scenarios or states of nature .
-in general only extreme values of the payoff in the matrix ( mini & maximum in any row / column can influence the decision-thus approach does not use all the info available.
Note the single criteria approach in chap 6-req estimates of likelihood of the various possible states of nature and uses all the info in the payoff matrix. |
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Term
Sequential decision (SD) & robustness analysis (RA)
-RA is based on the idea that in an uncertain world it is better to make a sequence if decisions that preserve flexibility keeping as many good options open as you can, than to make one inflexible decision that maybe overtaken by events . |
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Definition
-SD:avoid making one big decision, that determines the configuration of services for some in the future, instead make a sequence of smaller decisions
-decisions early in the sequence, that maintain flexibility & keep options open allow later decisions to take events into account as they unfold
-this approach us called ROBUSTNESS ANALYSIS
-RA;is concerned with situations where an individual, grp or organisation, needs to make commitments now under Cdx of uncertainty and where these decisions will be followed at intervals by other commitments.with a robustness perspective the focus will be on the alternative immediate commitments w/c could be made, w/c could be compared in terms of the range of possible future commitments with which they appear to be compatible |
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Term
RA
-used for uncertainty about OUTCOMES |
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Definition
-schematic graph of the planning as decision making approach
-optimal system for an assumed future state of environment is derived and the plan consist of the necessary decisions required to transform current system into that target configuration.
-declines to identify a future decision path or target
-only form decision are those in the initial decision package
-possible future commitments are of interest for the range of capability to respond to unexpected developments in the environmt e/c they represent
-graphical illustrations suggest a method and a formal measure of the options left open is required in order to compare initial commitments to see which is most robust
-robustness of any initial decision is defined as "the number of acceptable options at the planning horizon (PH) with which it is compatible , expressed as a ratio of the total Nb of acceptable options at the PH
- robustness of decision C1 given future F1
=number of acceptable options kept open, given C1 & F1/ total number if acceptable options given F1
-debility =number of acceptable options still open, given C1& F1/ total number of unacceptable options given F1
-A robustness & debility Matrix is constructed
Note : use of combination of indicators is common theme in DM is
1/similar to Roy's concordance& discordance indices & maximax/minimin criteria in game theory
2/meets DM dual concern to grasp opportunity of for very good outcomes & avoid very bad ones
-however it doesn't solve problem of deciding btw trade offs but provides a format for exploring certain aspects of a bp under U, rather than a method for finding an answer |
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Term
| Types of structured info obtained at end of RA: |
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Definition
-Shortlist of possible decision packages rated in terms if their Robutness against a variety of future
-prediction of the short term performance improvements to be expected from implementing each of the decision.packages;
-some guidelines as to what actions by other interests linked to the planning process would be more or less beneficial: these can serve as the basis for contingency plans : for incentives to encourage mutually advantageous behaviour
-an assessment of w/if the alternative future the system given it's current Cdx & evolution, is particularly vulnerable : focus for lobbying or opinion-forming efforts on trying to influence the occurrence of futures w/c in light of the current strategy would present a threat or opportunity |
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Term
| Linked decisions & strategic choice |
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Definition
A) Uncertainty pertaining to the working environment -Uncertainty that can be dealt with by responses of a relatively technical nature, by surveys, research investigations, forecasting exercises,costing estimations -the type of concern it responds to ; this decision is difficult because we don't know enough about its circumstances, because we can't readily predict what consequences of different ways forward might be.
B)uncertainty pertaining to guiding value:UV for short -U That calls for a political response,this response might take various forms, a request for Policy guidance from a higher authority, an exercise to clarify objectives, a programme of consultations among affected interests. - the concern here on the part of the decision maker tends to take the form of " the decision is difficult for us cse there are so many conflicting objectives, priorities, interests....no clear enough view if where we should be going.
C)U pertaining to related agenda: UR for short This kind of U calls for a response of exploration of the structural r/ship btw the decision, to negotiate or collaborate with other decision makers, to move to a broader planning perspective
- uncertainty as to where the boundaries of the decision problem should lie-
-concern here on part of DM here is of the form: 'this decision is difficult because we have been viewing it in too restricted terms , because we can't treat it in isolation. From ....'
-STRATEGIC CHOICE APPROACH : methodology for addressing uncertainty in decision making -method for approaching uncertainty around decision fields called AIDA ( Analysis of interconnected Decision Area) |
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Term
AIDA
-where there is U about the boundary of the decision problem |
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Definition
-A Decision area is any area of choice w/in which decision makers can conceive of alternative courses of action that might be adopted, now or at some time in the future.
-First task for AIDA is to Identify the distinct decision areas in a problem, the links btw them and the priorities attached to them
-draw up decision & option graphs showing the links btw the decisions areas involved & constructing an option tree w/c provided a shortlist of feasible options. |
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