ENMG 672: Introduction to Decision Theory

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ENMG 672: Introduction to Decision Theory
2013-09-05 22:21:02

Week 2 [9/5]: Introduction to Decision Theory • Homework 1 Due • Reading Due: Chapters 1 & 2 • What makes decisions hard? What makes a decision “good?” • How we make decisions: Intuition, Aesthetics, and Analysis • Decision Analysis Process & the Requisite Model • Elements of a Decision (Values, Decisions, Uncertain Events, & Consequences) • The Subjective Basis for Decisions: Values and Objectives • Very Simple Multi-Attribute Decision Analysis (a precursor to Utility Theory)
Show Answers:

  1. What is a decision?

    Note the term is often used
    to denote both a decision event and the selection of a particular decision
    Decision is the selection of one course of action over other potential courses of action.

    The selection process of deciding / choosing something, or resolving a question.
  2. (4) What is a “course of action?” How is it related to decision options?

    Note there are two answers.
    Any sequence of activities that an individual or unit may follow.
  3. (6) What are the three principal elements of a decision (event)?
    • Values and Objectives
    • Decision
    • Uncertain Events
    • Consequence
  4. (2) What is decision analysis?
    • a process
    • Step 1: Identify the Elements of the Decisions
    • Step 2: Construct Decision Model
    • Step 3a: Refine Decision Model
    • Step 3b: Solve Decision Model
    • Step 4: Perform Sensitivity Studies
    • Step 5: Provide Recommendation and supporting artifacts
  5. (2) What is decision management?
    the processes and tools used to manage (plan, assess, handle, and monitor & report) decisions

    - Closely related to risk and opportunity mgmt
  6. Decision Management Goals:
    • - Max opportunity & minimize risk
    • - Reduce risks & issues
    • - Increase opportunity (the inverse of risk)
  7. (2) Define “Risk.”
    a possible negative outcome (occurrence) associated with given action
  8. (2) What two parameters are used establish the magnitude of a risk?
    Likelihood and impact
  9. (2) What is a “likelihood” of an event? Is this
    generally a quality or a quantity?
    a measure of how likely it is that the event will occur quantity
  10. “likelihood” of an event: Is this generally a quality or a quantity?
  11. (2) What is a “consequence” of an event? Is this generally a quality or a quantity?
    result / outcome of an event

    measured in quantity
  12. (2) How does one provide a measure for a quality?
  13. (2) How does a risk differ from an “issue?”
    • issue occurred and need to be addressed
    • Risks are potential issues
  14. (2) What are the three principal types/categories of risk?
    • Technical
    • Schedule
    • Cost
  15. (2) How does one state a risk?
    • If event x 
    • then this bad thing will happen
    • with a probability of z
  16. (2) Is risk generally thought of as a quality or a quantity?
  17. (2) How does one determine a level of severity value to assign to a risk?
  18. (2) How many levels of severity does one typically use to categorize risk? What are they? Note there are two correct answers.
    3 to 5

    • For 3
    • Low, Med, High

    • For 5
    • Very Low, Med Low, Med, Med High, Very High
  19. (2) What is a “Risk Cube?” Provide an example.
    Ranks risk according to Likelihood and consequence
  20. (2) Into how many severity levels does one generally break consequence and likelihood? Why?
    Consequence and Probability are generally divided into the same number of levels as Risk
  21. (2) How does one ensure that unambiguous, objective criteria are used to assign severity levels to likelihoods and consequences?
  22. (2) What metric(s) is (are) used to measure likelihood?
  23. (2) What metric(s) is (are) used to measure cost consequence?
  24. (2) What metric(s) is (are) used to measure schedule
  25. (2) What metric(s) is (are) used to measure technical consequence?
  26. (2) What is “risk analysis” (part 1)?
    Risk analysis is the science of risks and their probability and evaluation. (per Wikipedia)
  27. (2) Define “Opportunity.”
    a possible positive outcome (occurrence) associated with a given course of action.
  28. (2) How is Opportunity related to Risk?
    Opportunity is the inverse of Risk and is generally tracked separately
  29. (2) What is “opportunity analysis” (part 1)?
    • Identify Opportunities: What good can happen
    • How likely it is to happen
  30. (4) How are risk and opportunity related to decisions?
  31. How are risk and opportunity analysis related to decision analysis?