If as many decision analysts believe for example

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Unformatted text preview: e that do not, such research would contribute to the theoretical debate between the decision analysts and behaviouralists. The behavioural decision theorists would no longer be able to claim that there is no value in a theory that does not aim to predict what decision-makers will do. Such research would obviously also be valuable to practitioners. This type of study, however, has been slow to appear in the literature doubtless because of the threat they represent to the decision analysts (Clemen, 1999 pp23-24): “Asking whether decision analysis works is risky. What if the answer is negative? The contribution will clearly be scientifically valuable, but many 3 individuals – consultants, academics, instructors – with a vested interest in decision analysis could lose standing clients, or even jobs.” The current study aims to remedy this situation by researching the use of decision analysis in investment appraisal decision-making by the major companies in the upstream oil and gas industry. The oil and gas industry epitomises investment decision-making under conditions of risk and uncertainty (Watson, 1998; Newendorp, 1996; Rose, 1987; Ikoku, 1984), and hence was one of the first industries to apply decision analysis (Grayson, 1960). The industry is often used as a laboratory for the development of new decision analysis tools and concepts (for example, Bailey et al., in press; Galli et al., 1999; Ball and Savage, 1999; Dixit and Pindyck, 1998 and 1994; Smith and McCardle, 1997) and it is recognised to lead all other industries, with the exception of the finance industry, in the extent to which it uses decision analysis (Schuyler, 1997). Clearly, then the oil industry provides a particularly useful context in which to establish whether a relationship exists between the use of decision analysis in investment appraisal by companies and business success. The study will focus on those major upstream oil and gas companies that are operators in the U.K.. Since most of the major oil companies that operate in the U.K. are global players in the oil industry, the findings will be indicative of investment decision-making in the worlds’ major upstream oil and gas companies. The research questions that the thesis aims to answer and methodological approach followed are outlined in the following section. 1.3 RESEARCH QUESTIONS 1. Which techniques are the most appropriate for companies to utilise in their investment decision-making? This question is motivated by the observation that there are many decision analysis techniques presented in the academic investment decision-making literature leading many practitioners to feel confused about which decision analysis techniques are most applicable for investment decisions (see Chapter 6 and studies by Schuyler (1997) and Fletcher and Dromgoole (1996)). Clearly, there is a need to identify which of the decision analysis techniques and concepts presented in the academic investment 4 decision-making literature are the most appropriate for practitioners to use for investment decision-making. The current study undertakes such research in the upstream oil and gas industry. The current study draws on the decision analysis and oil in...
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