Evaluate these alternatives in terms of the outcome

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Unformatted text preview: invoke a von Neumann-Morgenstem selection rule. In this case, alternatives are treated as "gambles" (or lotteries). The probability of each outcome is also known or can be subjectively estimated, usually by creating a decision tree. The von Neumann-Morgenstem selection rule applies a separately developed utility function to each outcome, and chooses the alternative that maximizes the expected utility. This selection rule is easy to apply when the lottery outcomes can be measured in dollars. Although multi-attribute cases are more complex, the principle remains the same. The basis for the von Neumann-Morgenstem selection rule is a set of mathematical axioms about how individuals should behave when confronted by uncertainty. Practical application of this rule requires an ability to enumerate each "state of nature" (hereafter, simply called "state"), knowledge of the outcome associated with each enumerated state for each alternative, the probabilities for the various states, and a mathematical expression for the decision maker's utility function. This selection rule has also found use in the evaluation of system procurement alternatives. See Section 4.6.3 for a discussion of some related topics, including decision analysis, decision trees, and probabilistic risk assessment. Another selection rule for this class of decision problem is called the minimax rule. To apply it, the system engineer computes a loss function for each enumerated state for each alternative. This rule chooses the alternative that minimizes the maximum loss. Practical application re- NASA Systems Engineering Handbook Systems Analysis and Modeling Issues quires an ability to enumerate each state and define the loss function. Because of its "worst case" feature, this rule has found some application in military systems. 5.1.4 Trade Study Process: Summary System architecture and design decisions will be made. The purpose of the trade study process is to ensure that they move the...
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This document was uploaded on 02/26/2014 for the course E 515 at University of Louisiana at Lafayette.

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