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viii Contents Chapter 16 The analytic hierarchy process 413 Chapter 17 Alternative decision-support systems 427 Suggested answers to selected questions 463 Index 471
Foreword It is a curious fact that although ability to take decisions is at the top of most senior executives’ list of attributes for success in management, those same people are usually unwilling to spend any time developing this quality. Perhaps decision making is considered as fundamental as breathing: essential for life, a natural and automatic process. Therefore, why study it? In this book, Paul Goodwin and George Wright show why: because research over the past 30 years has revealed numerous ways in which the process of making decisions goes wrong, usually without our knowing it. But the main thrust of this book is to show how decision analysis can be applied so that decisions are made correctly. The beauty of the book is in providing numerous decision-analysis techniques in a form that makes them usable by busy managers and administrators. Ever since decision theory was introduced in 1960 by Howard Raiffa and Robert Schlaifer of Harvard <strong>University</strong>’s Business School, a succession of textbooks has chronicled the development of this abstract mathematical discipline to a potentially useful technology known as decision analysis, through to numerous successful applications in commerce, industry, government, the military and medicine. But all these books have been either inaccessible to managers and administrators or restricted to only a narrow conception of decision analysis, such as decision trees. Unusually, this book does not even start with decision trees. My experience as a practicing decision analyst shows that problems with multiple objectives are a frequent source of difficulty in both public and private sectors: one course of action is better in some respects, but another is better on other criteria. Which to choose? The authors begin, in Chapter 3, with such a problem, and present a straightforward technology, called SMART, to handle it. My advice to the reader is to stop after Chapter 3 and apply SMART on a problem actually bothering you. Decision analysis works best on
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Page 12 and 13: x Foreword real problems, and it is
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Page 17 and 18: 1 Introduction Complex decisions Im
Page 19 and 20: The role of decision analysis 3 you
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Page 27 and 28: Overview of the book 11 and profit.
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44 Decisions involving multiple obj
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72 Introduction to probability Beca
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74 Introduction to probability prac
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76 Introduction to probability we w
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78 Introduction to probability whet
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80 Introduction to probability give
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82 Introduction to probability prob
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84 Introduction to probability deci
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86 Introduction to probability that
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88 Introduction to probability inte
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90 Introduction to probability subj
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92 Introduction to probability (5)
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94 Introduction to probability (a)
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96 Decision making under uncertaint
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98 Decision making under uncertaint
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100 Decision making under uncertain
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6 Decision trees and influence diag
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Constructing a decision tree 145 be
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Determining the optimal policy 147
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Decision trees and utility 149 succ
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Decision trees involving continuous
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Practical applications of decision
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Assessment of decision structure 15
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Assessment of decision structure 15
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Eliciting decision tree representat
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Eliciting decision tree representat
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Summary 163 where the resulting dec
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Exercises 165 other elements of the
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Exercises 167 (b) Assuming that Wes
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Exercises 169 is not hired, given t
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Exercises 171 failing to meet the p
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Exercises 173 why it was rational f
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Exercises 175 (11) In the Eagle Mou
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References 177 ABC Chemicals are pl
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7 Applying simulation to decision p
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Monte Carlo simulation 181 Of cours
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Monte Carlo simulation 183 Table 7.
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Applying simulation to a decision p
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Applying simulation to investment d
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Summary 205 Hull 10 ), some of them
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Exercises 207 (c) Use your simulati
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Exercises 209 For each factor the f
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Exercises 211 (b) Suppose that your
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References 213 6 million Therefore
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216 Revising judgments in the light
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9 Biases in probability assessment
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Introduction 249 of people watching
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The availability heuristic 251 make
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The representativeness heuristic 25
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The anchoring and adjustment heuris
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The anchoring and adjustment heuris
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Other judgmental biases 263 Other j
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Is human probability judgment reall
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Exercises 271 Did you receive timel
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References 273 have been taken from
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References 275 18. Hamilton, D. L.
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10 Methods for eliciting probabilit
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Preparing for probability assessmen
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Consistency and coherence checks 28
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Assessment of the validity of proba
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Assessment of the validity of proba
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Assessing probabilities for very ra
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Exercises 293 Odds in favor of even
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References 295 13. Wright, G. and W
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298 Risk and uncertainty management
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310 Decisions involving groups of i
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330 Resource allocation and negotia
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14 Decision framing and cognitive i
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How people frame decisions 357 Figu
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Imposing imaginary constraints and
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Inertia in strategic decision makin
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Studies in the psychological labora
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Overcoming inertia? 369 it is diffi
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Discussion questions 373 frame anal
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References 375 References 1. Luchin
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15 Scenario planning: an alternativ
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Introduction 379 documented in Chap
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Scenario construction: the extreme-
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Using scenarios in decision making
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Using scenarios in decision making
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Scenario construction: the driving
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Case study of a scenario interventi
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Table 15.1 - The components of the
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Illustrative case study 403 (b) Att
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Illustrative case study 405 Stage 4
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Illustrative case study 407 importa
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Conclusion 409 combinations. Often
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References 411 2. Van der Heijden,
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414 The analytic hierarchy process
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17 Alternative decision-support sys
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Expert systems 429 generally agreed
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Expert systems 431 that knowledge e
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Expert systems 433 (1) That the sub
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Expert systems 435 information syst
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Expert systems 437 to focus on ‘t
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Expert systems 439 On the basis of
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Is there any intention/expectation
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Expert systems 443 described above
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Expert systems 445 body of knowledg
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Statistical models of judgment 447
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Comparisons 453 ‘broken leg’ cu
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Some final words of advice 455 Ques
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Some final words of advice 457 of t
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References 459 Table 17.1 - Summary
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References 461 20. Eisenhart, J. (1
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Chapter 3 Suggested answers to sele
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Suggested answers to selected quest
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472 Index Brown, C.E. 446 Brown, S.
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474 Index HIVIEW 58 Hodgkinson, G.P
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476 Index scenario intervention cas
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