Learning Lab Denmark - INCUBEus

Decision Analysis

The general idea with decision analysis is to provide decision makers with tools that reduce the complexities of a given problem to an exercise of logic. When decision alternatives can not be compared solely by quantitative criteria, such as profit maximation or utility functions, decision analysis uses additional qualitative measurements such as interviews, surveys, and informal discussions.

Like in traditional quantitative risk assessment, every possible option is assigned a probability and then weighted, based on knowledge about positive and negative effects, possible consequences and personal judgments. As a result of these steps, the 'best' decision will emerge as the option with the highest utility value.

This process of step-wise estimations and probability assignments on possible outcomes has proven to be an excellent guideline for rational decision making.

However, decision analysis is based on a rational process of one individual only. As soon as we encounter the need for collective decision making, this procedure fails, because groups with different criteria and values will not agree on the estimates made by one individual.

Criteria for comparing different alternatives among individuals or groups are missing or not applicable in this setup. Thus, democratic decision making cannot very well be based on normative decision analysis because it has no rational means by which to resolve conflicts among groups.

In addition to this, it has proven very difficult to put numerical values on preferences and expectations. Verbal reasoning and emotional commitments are intrinsically difficult to represent by numbers and mathematical operations.

Examples of using decision analysis:
Drill for oil or not drill for oil?
Treat with antifungal drugs or not?
An example using tree analysis
An example using Multi-Attribute Utility Analysis (MAUT)

Further reading
Fischhoff, B, Lichtenstein S., Slovic, P., Derby, S.L., Keeney, R.L. (1981). Acceptable Risk?, Cambridge, Cambridge University Press.

Jaeger, C.C., Renn, O., Rosa, E.A., Webler, T. (2001). Risk, Uncertainty, and Rational Action, Earthscan Publications Ltd., London and Sterling, VA

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Nine Technologies

A. Air Transport
B. Buildings
C. Land Transport
D. Marine Transport
E. Bridges and Dams
F. Oil Tankers
G. Chemical Industry
H. Medical Industry
I. Nuclear Industry

Nine Theories

Quantitative Risk Assessment
Decision Analysis
Cost-benefit Analysis
Normal Accident Theory
High Reliability Organisations
Risk communication
Arena Theory
Cultural Theory

Five Categories

Hazard (0-1000)
Range (km2)
Fear Factor (0-10)
Media Effect (0-100)