Describe a unique situation where decision analysis could be

Describe a unique situation where decision analysis could be applied to support business decision-making.

Solution

Decision analysis in general assumes that the decision maker faces a decision problem where he or she must choose at least and at most one option from a set of options. In some cases this limitation can be overcome by formulating the decision making under uncertainty as a zero-sum two-person game. In decision making under pure uncertainty, the decision maker has no knowledge regarding which state of nature is “most likely” to happen. He or she is probabilistically ignorant concerning the state of nature; therefore he or she cannot be optimistic or pessimistic. In such a case, the decision maker invokes consideration of security. Notice that any technique used in decision making under pure uncertainties is appropriate only for the private life decisions. Moreover, the public person (i.e., you, the manager) has to have some knowledge of the state of nature in order to predict the probabilities of the various states of nature. Otherwise, the decision maker is not capable of making a reasonable and defensible decision in this case.