After completing this chapter, you should be able to:
- Outline the characteristics of a decision theory approach to decision making.
- Describe and give examples of decisions under certainty, risk, and complete uncertainty.
- Make decisions using maximin, maximax, minimax regret, Hurwicz, equally likely, and expected value criteria and use Excel to solve problems involving these techniques.
- Use Excel to solve decision-making problems under risk using the expected value criterion.
- Develop decision trees that consist of a combination of decision alternatives and events.
- Use TreePlan to develop decision trees with Excel.
- Determine if acquiring additional information in a decision problem will be worth the cost.
- Calculate revised probabilities manually and with Excel.
- Analyze the sensitivity of decisions to probability estimates.
- Describe how utilities can be used in lieu of monetary value in making decisions.