Chapter 2

# Chapter 2 - Chapter 2 Making Hard Decisions R. T. Clemen,...

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Making Hard Decisions R. T. Clemen, T. Reilly Chapter 2 – Elements of Decision Problems Lecture Notes by: J.R. van Dorp and T.A. Mazzuchi http://www.seas.gwu.edu/~dorpjr/ Slide 1 of 19 COPYRIGHT © 2006 by GWU Draft: Version 1 Elements of Decision Problems Chapter 2 Making Hard Decisions R. T. Clemen, T. Reilly

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Making Hard Decisions R. T. Clemen, T. Reilly Chapter 2 – Elements of Decision Problems Lecture Notes by: J.R. van Dorp and T.A. Mazzuchi http://www.seas.gwu.edu/~dorpjr/ Slide 2 of 19 COPYRIGHT © 2006 by GWU Draft: Version 1 Introduction Given a complicated problem, how should one begin? Critical Step – Identify the elements: 1. Values and objectives 2. Decisions to make 3. Uncertain Events 4. Consequences All four will be addressed in more detail separately.
Making Hard Decisions R. T. Clemen, T. Reilly Chapter 2 – Elements of Decision Problems Lecture Notes by: J.R. van Dorp and T.A. Mazzuchi http://www.seas.gwu.edu/~dorpjr/ Slide 3 of 19 COPYRIGHT © 2006 by GWU Draft: Version 1 No values No objectives No Decisions Values and Objectives 1.OBJECTIVES: A specific thing one wants to achieve: To harvest successfully – Farmer. To resolve a specific scientific problem – Scientist. To make a lot of money – Investor. Special Objective: Making Money; often a surrogate objective (or means objective) for other objectives e.g. eating, traveling, afford clothing, etc Person’s Values: Collection of objectives

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Making Hard Decisions R. T. Clemen, T. Reilly Chapter 2 – Elements of Decision Problems Lecture Notes by: J.R. van Dorp and T.A. Mazzuchi http://www.seas.gwu.edu/~dorpjr/ Slide 4 of 19 COPYRIGHT © 2006 by GWU Draft: Version 1 Values and Objectives Underlying Objectives: Understanding the underlying Objectives (or fundamental objectives) is crucial to formulating the decision problem and list alternatives. Example: Objective: Travel comfortably from Point A to B Alternatives: Public Transportation, Lease a Car, Buy a Car, Buy a Motorcycle Really two objectives: Traveling from A to B and Traveling Comfortably
Making Hard Decisions R. T. Clemen, T. Reilly Chapter 2 – Elements of Decision Problems Lecture Notes by: J.R. van Dorp and T.A. Mazzuchi http://www.seas.gwu.edu/~dorpjr/ Slide 5 of 19 COPYRIGHT © 2006 by GWU Draft: Version 1 Values and Objectives 1. How much more money are you willing to spend on air conditioning for your car? 2. How much more money are you willing to spend on a different color? 3. How much more money are you willing to spend to buy a reliable brand? Often a trade off has to be made between “money making” objective and other fundamental objectives:

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Making Hard Decisions R. T. Clemen, T. Reilly Chapter 2 – Elements of Decision Problems Lecture Notes by: J.R. van Dorp and T.A. Mazzuchi http://www.seas.gwu.edu/~dorpjr/ Slide 6 of 19 COPYRIGHT © 2006 by GWU Draft: Version 1 DECISION CONTEXT = The setting in which a decision occurs Person Value’s = Collection of All Objectives Decision Context
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## This note was uploaded on 01/26/2010 for the course ADMS 3300 taught by Professor Shamimabdullah during the Spring '10 term at York University.

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Chapter 2 - Chapter 2 Making Hard Decisions R. T. Clemen,...

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