Advances in Decision Analysis: From Foundations to Applications

COVER......Page 1
HALF-TITLE......Page 3
TITLE......Page 5
COPYRIGHT......Page 6
CONTENTS......Page 7
LIST OF CONTRIBUTORS......Page 11
PREFACE......Page 13
REFERENCES......Page 15
The Rational Decision Maker......Page 19
Subjective Expected Utility (SEU)......Page 20
Bayes' Theorem......Page 21
Decision Theory......Page 22
Decision Analysis......Page 23
REFERENCES......Page 25
From Homo sapiens to the Renaissance......Page 31
Mathematics......Page 32
Early Analysis of Games......Page 33
Probability and Statistics......Page 34
Inverse Probability......Page 35
Interpretations of Probability......Page 36
Preference and Risk Aversion......Page 37
Operations Research......Page 38
Decision Theory......Page 39
Psychology of Decision Making......Page 40
Foundations of Measurement......Page 41
Decision Analysis......Page 42
REFERENCES......Page 43
Origins......Page 50
The Second Pillar: Decision Theory......Page 52
The Third Pillar: Epistemic Probability......Page 53
The Fourth Pillar: Cognitive Psychology......Page 54
General Concepts......Page 55
Group Decision Making......Page 56
Clairvoyance......Page 57
Desiderata......Page 58
The Rules......Page 59
Decision Engineering......Page 61
Influence, Relevance, and Decision Diagrams......Page 63
Cogency  versus Verisimilitude......Page 65
Language of Decision Analysis......Page 66
Confusions......Page 67
Classical Statistics Persists......Page 68
Dealing with Multiple Attributes......Page 69
Risk Preference......Page 71
Future of Decision Analysis......Page 72
REFERENCES......Page 73
The Operations Research Antecedent......Page 75
From OR to Game Theory to Statistical Decision Theory......Page 76
Go to Harvard or Stay at Columbia?......Page 77
From Closet Bayesian to Proselytizer......Page 78
Decision Trees......Page 79
From Statistical Decision Theory to Managerial Economics (1961-1964)......Page 80
My RAND Experience and the Development of Multi-attribute Utility Theory ( MAUT)......Page 81
The Decision and Control Nonprogram (1965-1975)......Page 82
Directing  IIASA  from 1972 to 1975......Page 83
Nuclear Energy Policy Study (NEPS)......Page 84
Decision Making - A Critical Life Skill......Page 85
Acknowledgment......Page 86
REFERENCES (CHRONOLOGICALLY ARRANGED)......Page 87
Ward Edwards: Founder of Behavioral Decision Theory......Page 89
The Early Days......Page 90
Bayesian Statistics for Psychologists......Page 91
Probabilistic Information Processing Systems......Page 92
Early Tests of the Subjective Expected Utility Model......Page 93
Transitions......Page 94
USC and the Social Science Research Institute......Page 95
Retirement......Page 97
REFERENCES......Page 98
Three Steps of Structuring......Page 99
Becoming Educated About the Problem Environment......Page 101
Hunting for the Decision......Page 102
Defining the Purpose of the Analysis......Page 103
Multiple Alternative Structures......Page 104
Eight Analytic Structures......Page 109
Influence Diagrams......Page 114
Matching Problems and Analytic Structures......Page 117
Generic Problems and Analytic Structure Templates......Page 118
Objectives Hierarchies......Page 119
Influence Diagrams......Page 120
REFERENCES......Page 121
Introduction......Page 122
Objectives and Attributes......Page 123
Identifying Objectives......Page 124
Listing Values......Page 128
Specifying Objectives from Values......Page 130
Structuring Objectives......Page 131
Desirable Properties of Fundamental Objectives......Page 135
Basic Concepts about Attributes......Page 136
Desirable Properties of Attributes......Page 138
Unambiguous......Page 139
Comprehensive......Page 140
Direct......Page 141
Operational......Page 142
A Decision Model for Selecting Attributes......Page 143
Summary......Page 145
REFERENCES......Page 146
8 Eliciting Probabilities from Experts......Page 147
Probabilities of Events......Page 148
Assessment  for Continuous Quantities......Page 150
Measuring the Quality of Assessed Probabilities......Page 156
Heuristics and Biases in Forming Probability Judgments......Page 159
Selecting  and Posing Questions......Page 163
Selecting Experts......Page 165
Organizing an Expert Judgment Process......Page 166
REFERENCES......Page 168
Introduction......Page 172
Axiomatic Approaches......Page 174
Bayesian Approaches......Page 176
Bayesian Combinations of Probabilities......Page 177
Bayesian Models for Combining Probability Distributions......Page 179
Mathematical versus Intuitive Aggregation......Page 182
Comparisons among Mathematical Methods......Page 183
Mathematical versus Behavioral Aggregation......Page 184
Example: Seismic Hazard......Page 185
Conclusion......Page 187
REFERENCES......Page 190
10 Model Building with Belief Networks and Influence Diagrams......Page 195
Probabilistic Models......Page 196
Analyzing Probabilistic Models......Page 203
Decision Models......Page 207
Analyzing Decision Models......Page 214
REFERENCES......Page 217
11 A Bayesian Approach to Learning Causal Networks......Page 220
Causal Networks......Page 222
Learning Acausal Networks......Page 226
Learning Causal-Network Parameters......Page 230
Learning Causal-Network Structure......Page 234
Learning Hidden Variables......Page 236
REFERENCES......Page 237
Introduction......Page 239
Strength of Preference......Page 240
Utility Theory......Page 241
Assessment of the Utility Function......Page 242
Relative Risk Aversion......Page 243
Contextual Uncertainty......Page 244
Measuring Riskiness......Page 245
Utility for Consumption......Page 246
Derived Utility......Page 247
REFERENCES......Page 248
13 Practical Value Models......Page 250
Building a Value Model......Page 251
Practical Considerations for Choosing a Value Model......Page 253
Utility versus Measurable Value......Page 254
Additive versus Nonadditive Value Models......Page 255
Linearity......Page 257
Risk Aversion......Page 258
Practical Considerations for Selecting an Assessment Procedure......Page 259
Equivalent-Cost Procedure......Page 260
Rating and Weighting Procedure......Page 263
Practical Considerations for Developing Value Models with Decision Makers......Page 264
Constructing Value Models......Page 265
Bounding Value Parameters......Page 266
Conclusions......Page 267
REFERENCES......Page 269
The SEU Model and Its Assumptions......Page 271
Incomplete Preferences, Imprecise Probabilities and Robust Decision Analysis......Page 273
Allais' Paradox, Transformed Probabilities, and Rank-Dependent Utility......Page 274
Ellsberg's Paradox, Knightian Decision Theory, Maxmin Expected Utility, and Second-Order Utility......Page 278
State-Preference Theory, State-Dependent Utility, and Decision Analysis with Risk-Neutral Probabilities......Page 284
Neuroeconomics: The Next (and Final?) Frontier......Page 289
REFERENCES......Page 292
Application Areas......Page 297
Overview of Current Challenges in PRA for Risk Management......Page 298
Structuring Risk Quantification: Models for Accident Probabilities and Consequences......Page 299
Quantifying Model Components and Inputs......Page 304
Treatment of Dependence......Page 305
Alternatives to Subjective Prior Distributions......Page 306
Model Uncertainty and Bayesian Model Averaging......Page 308
Risk Characterization......Page 310
Challenges in Communicating the Results of PRAs......Page 311
Methods of Risk Management to Avoid......Page 312
A Novel Approach: Game-Theoretic Models......Page 313
REFERENCES......Page 315
Engineering Risk Analysis Method: Imagination and Rationality......Page 320
Early Technology Assessment and Anticipation of "Perfect Storms"......Page 321
The Challenge of Structuring the Model......Page 322
Dynamic Analysis......Page 324
Incomplete Evidence Base......Page 325
Data......Page 326
Extension of RA to Include Human and Management Factors: The SAM Model......Page 327
Problem Formulation Based on a SAM-Type Influence Diagram......Page 329
The Overall Risk Analysis Model......Page 331
Example 2. A Two-Dimensional Risk Analysis Model: The Heat Shield of the Space Shuttle Orbiters......Page 332
Example 3. A Dynamic Analysis of Accident Sequences: Anesthesia Patient Risk......Page 334
Step 2......Page 336
Step 3......Page 337
Example 4. Probabilistic Analysis of Threats of Terrorist Attacks......Page 338
Conclusions......Page 339
REFERENCES......Page 340
17 Health Risk Analysis for Risk-Management Decision Making......Page 343
Quantitative Definition of Health Risk......Page 344
Example: Opposite Statistical and Causal Risk Relations......Page 346
A Bayesian Network Framework for Health Risk Assessment......Page 347
Hazard Identification......Page 350
Exposure Assessment......Page 354
Example: Mixture Distributions and Unknown Exposure-Response Models......Page 356
Dose-Response Modeling......Page 358
Example: Best-Fitting Parametric Models May Not Fit Adequately......Page 359
Risk And Uncertainty Characterization For Risk Management......Page 360
Example: Risk Characterization Outputs......Page 361
CONCLUSIONS......Page 363
REFERENCES......Page 364
Gather Information and Identify Options......Page 369
To Error Is Human......Page 370
Define the Problem and Set the Goals......Page 372
Gather Information and Identify Options......Page 374
Evaluate the Information and the Options......Page 376
Make a Choice......Page 377
Implement the Choice and Monitor the Results......Page 378
Combining Frames......Page 379
Frequency Formats......Page 382
Disclosure......Page 384
Incentives......Page 385
Conclusion......Page 386
REFERENCES......Page 388
Introduction......Page 393
The Decision Conference......Page 394
Stages in a Typical Decision Conference......Page 397
The Purposes of a Decision Conference......Page 398
Evolution to Decision Conferencing......Page 399
New Business Appraisal......Page 400
Prioritization of Projects......Page 402
Requisite Decision Models......Page 410
Group Processes......Page 411
Facilitation Skills......Page 412
Do Decision Conferences Work?......Page 413
REFERENCES......Page 415
The Challenge of Organizational Resource Allocation......Page 418
Capital Allocation Using Mathematical Optimization......Page 419
Measuring Project Benefits Using Multiattribute Value Models......Page 422
Resource Allocation with Uncertain Benefits and Costs......Page 423
Hospital Capital Budgeting: Lessons from Practice......Page 427
Conclusion: Benefits and Costs of Decision Analysis for Resource Allocation......Page 432
REFERENCES......Page 433
21 From Decision Analysis to the Decision Organization......Page 437
Best Practices for Decision Making......Page 439
The Nine Principles of the Smart Organization......Page 441
Rogues......Page 443
The New Era of the Hyper-World......Page 447
Turbo Decision Analysis......Page 450
Embedded Decision Analysis......Page 451
Plan-of-Record Decision Analysis......Page 453
Bringing It All Together......Page 455
A New Viewpoint: The Decision Organization......Page 456
Decision Processes and Organizational Routines......Page 458
The Organizational Decision Worldview......Page 460
Conclusions......Page 466
REFERENCES......Page 467
Background......Page 469
Defining a Standard for High-Quality Decisions......Page 470
Five Means for Achieving Organizational Decision Competency......Page 474
The Journey to Organizational Decision Competency......Page 476
The Current State of Adoption......Page 478
GM's Road to Decision Competency......Page 479
Longstanding Practices and Culture......Page 480
Introducing the Dialog Decision Process......Page 481
Decision Competency Climbs Steadily......Page 483
Chevron - Decision Making in a High-Uncertainty Business......Page 484
Conclusion......Page 485
Acknowledgments......Page 486
23 Negotiation Analysis: Between Decisions and Games......Page 487
The Negotiation Analytic Approach......Page 489
Interests......Page 490
Alternatives to Negotiated Agreement......Page 492
Representing the Structure......Page 493
From Structure to Outcome: Favorable Changes in the Perceived Zone of Possible Agreement......Page 494
Creating Value......Page 496
Managing the Tension between Creating and Claiming Value: The Negotiators' Dilemma......Page 498
Social Behavior in Negotiation......Page 499
Conclusions and Further Directions......Page 502
REFERENCES......Page 503
24 The Adoption of Multiattribute Utility Theory for the Evaluation of Plutonium Disposition Options in the United States......Page 507
The Objectives and the Measures......Page 509
The Alternatives......Page 511
The MAU Model......Page 512
Evaluation of the Alternatives......Page 514
Sensitivity Analysis......Page 517
Hybrid Deployment Strategies......Page 518
The MAU Analysis in Russia......Page 520
ISTC Project 369......Page 521
ISTC Project 1443......Page 524
Conclusion......Page 525
Appendix......Page 527
REFERENCES......Page 530
The Problem......Page 532
Getting Started......Page 534
The Multiattribute Utility Analysis......Page 535
Interlude about the Politics of Decision Making......Page 539
Production Assurance Analysis......Page 541
Cost Risk Analysis......Page 546
Environmental Analysis......Page 551
The Decision......Page 552
The Aftermath and Some Thoughts about the Role of the Decision Analysis......Page 554
REFERENCES......Page 556
26 Applications of Decision Analysis to the Military Systems Acquisition Process......Page 557
Concept Selection Phase: USMC Mobile Protected Weapons System......Page 559
Concept Refinement Phase: Air Defense Weapons-Mix Analysis......Page 562
System Development and Demonstration Phase: Source Selection of the Light Armored Vehicle......Page 565
Production and Fielding Phase: Joint Services Weapon Proponency Analysis......Page 567
Operations and Support Phase: Airborne and Space-Borne Reconnaissance Force Mixes......Page 570
Linking Systems Acquisition to PPBS: Resourcing the Systems......Page 576
Conclusion......Page 578
Concept Selection Phase......Page 579
Ongoing in All Phases (Resource Allocation)......Page 580
REFERENCES......Page 581
27 Balancing Environmental and Operational Objectives in Nuclear Refueling Strategies......Page 582
Mission Statement......Page 583
Decision Pyramid......Page 584
Objectives Hierarchy......Page 585
Objective: Maximize Fish Protection......Page 586
Strategies......Page 588
Uncertainties......Page 589
Modeling – Linking Choices to Outcomes......Page 590
Data Collection – Developing Reliable Inputs......Page 593
Evaluation – Performing Analyses to Generate New Insights......Page 595
Stakeholder Reaction......Page 596
Reflections......Page 597
Appendix......Page 598
REFERENCES......Page 599
Introduction......Page 600
Background References......Page 602
Applications Articles and Publications Trends......Page 603
Classification of Applications Areas, with Trends......Page 606
Methodological and Implementation Issues, with Trends......Page 608
Additional Noteworthy Trends and Developments......Page 611
General Trends and Developments......Page 612
Interdisciplinary Trends and Developments......Page 614
Status in Companies and Universities......Page 619
Better Tools......Page 620
REFERENCES......Page 621
INDEX......Page 629