quantitative decisions in business Discuss the differences b

quantitative decisions in business

Discuss the differences between decision making under certainty, decision making under risk, and decision making under uncertainty. Include basic definitions and techniques used to solve problems for each type of decision. Provide an example of each decision and explain your answer.

Solution

Decision making under certainty is when the alternatives, the means to achieve the outcomes and the desired outcomes are known with certainty.

Example is the completion of a daily routine task like daily production process for manufacturing certain goods.

Decision making under risk is when the information about the alternatives is complete but the outcomes and their corresponding probabilities are known.

Example includes risk and return on various kinds of investments.

Decision making under uncertainty is when there is no complete information about the alternatives or outcomes and the decisions need to be arrived based on a set of assumptions.

Example includes financial recession, political uncertainty, natural disasters etc.