Making Decisions under Uncertainty: Value Chain Development

Vladimir Savchuk

MPRA Paper from University Library of Munich, Germany

Abstract: This presentation provides an overview of the various approaches and theories related to decision-making when faced with uncertainty. The paper's main focus is on the decision-making process itself, including how all its various components should be combined and how they should be reflected in decision rules. While the theme is not new, significant progress has been made in the past century in terms of developing decision-making techniques and measuring and managing uncertainty, largely due to the advancements in probability theory and fuzzy set theory. The goal of this paper is to develop a Value Chain for the Decision-Making process, achieved through the integration of the main components of the decision-making system under uncertainty, namely: (i) concepts of uncertainty, (ii) ways of thinking under uncertainty, (iii) creating models, and (iv) techniques of decision-making. These issues are considered in their dialectical relationship. The presentation will not delve into the specifics of each part of the system but rather aims to explain its essence and practical applicability. Both data-driven decision-making and non-quantitative approaches to making decisions are explored in the presentation.

Keywords: Uncertainty; Risk; Probability; Fuzzy sets; Metaphor; Narrative; Decision Theory; Expected Utility Theory; Prospect Theory; Possibility Theory; Real Options. (search for similar items in EconPapers)
JEL-codes: M21 (search for similar items in EconPapers)
Date: 2022-11, Revised 2023-04
New Economics Papers: this item is included in nep-upt
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