Lecture 1 (End of Chapter Questions) Flashcards

1
Q

Why is decision making difficult?

A
  1. Common cognitive bias
  2. Problem complexity
  3. Multiple objectives
  4. Risk
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2
Q

What are the requirements for rational preferences?

A
  1. Prospective orientations: Decisions should be forward looking (no sunk costs!)
  2. Completeness: decision maker has a preference for any pair of alternatives
  3. Transitivity: If a is better than b and b is better than c, then a is better than c
  4. Independence of irrelevant alternatives: Given {a, b}, if a is better b, a is still prefered over b for the set {a, b, c}
  5. Invariance: Preferences should not be affected when the same problem is presented in a different way (200 alive or 400 die)
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3
Q

What are the basic components of a decision problem?

A
  1. Objectives
  2. Alternatives
  3. Uncertain events
  4. Outcomes
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4
Q

What are the goals of decision analysis?

A

The goal is to make better, more rational decisions.

  • Prescriptive decision theory aims to teach the method and concepts that support and improve rational decision making
  • Descriptive decision theory aims to raise your consciousness about decision-making by pointing out the errors and biases in it
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5
Q

Explain the experiment in and the findings of Bond, Carlson and Keeney (2008).

A
  1. Step: DMs generate as many relevant objectives as they can (Objectives list)
  2. Step: DMs see the master list and check all objectives that are relevant
  3. Step: DMs map objectives from Step 1 to the master list. Checked items that map back are self-generated objectives; all others are recognised
  4. Step: DMs rank or rate the importance of their checked objectives

Findings: Participants failed to generate a comprehensive list of objectives. On average the number of self generated objectives was 6 while the number of recognised objectives was 7.6

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6
Q

What are the properties of an ideal set of objectives?

A
  1. Completeness (all objectives included)
  2. Simplicity (small set of objectives)
  3. No redundancies
  4. Preference independence (preferences with respect to the attribute levels of a subset of objectives should be independent of the attribute levels of the remaining objectives)
  5. Measureability
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7
Q

How to construct fundamental-objectives hierarchies?

A
  • Diagram of relationships between objectives, sub-objectives and attributes
  • All objectives in a hierarchy should be fundamental
  • Most general objective at the top
  • Higher levels represent more general objectives
  • Lower levels represent more specific statements
  • Lowest levels represent attributes based in which the alternatives will be compared
  • Attributes are used to characterise performance in relation to an objective
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8
Q

What is the difference between fundamental and means objectives?

A
  • Fundamental: relevant for their own sake without further justification (e.g. minimize traffic deaths)
  • Means: relevant because they help to achieve a more fundamental objective (e.g. more traffic lights)
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9
Q

What are the desirable properties of an attribute?Explain each with an example.

A
  1. Direct: number of fatalities versus number of accidents -> what is the objective?
  2. Operational: low cost of information collection
  3. Comprehensive: cover the full range of possible consequences
  4. Understandable: units should be understandable (e.g. liter per km and not gallon per km)
  5. Unambigious: same interpretation for everyone (e.g. number of stars on google)
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10
Q

What are the types of attributes (measures)?Explain each with an example.

A
  1. Natural: is in general use with a common interpretation (e.g. costs in dollar, weight in kg)
  2. Zero or One Measures: describe whether the alternatives have a specific attribute or not (e.g. diploma yes or no)
  3. Constructed Measure: is developed for a particular decision problem (e.g. scala from 1 to 5 for ease of use)
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