Logical Decisions - Classweb

When you select this option, LDW asks you to enter the three
levels.
Three Point Estimate. The Three Point Estimate option lets you
describe the level for a measure and alternative by defining the 5
percent, 95 percent, and 50 percent levels of its cumulative
probability distribution function. See Figure 6-16.
Figure 6-16. Example of a measure level defined by a three point estimate
When you select this option, LDW asks you to enter the three
levels. You can use this option when you are unsure of the actual
form of the distribution, and still get reasonably accurate results.
How LDW uses Probabilities. LDW generally treats probabilities
as certainty equivalents -- single numbers that are equal in terms
of preference to the entire probability distribution. The theory of
decision analysis tells us that this certainty equivalent alone
should be sufficient for decision making.
LDW also provides options that let you see how the uncertainties
in measure levels result in uncertainties in the overall results.
LDW does this by using Monte Carlo Simulation.
In Monte Carlo simulation, a number of passes are made to
compute an alternative's utility on a measure or goal. For each
Section 6 -- Using LDW 1: Structuring 6-27