Different Paradigms of Decision-Making

Pekka Korhonen and Jyrki Wallenius
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Jyrki Wallenius: Aalto University School of Business

Chapter Chapter 1 in Making Better Decisions, 2020, pp 1-4 from Springer

Abstract: Abstract All students of Decision Analysis and Operations Research have been taught that decision-making is choice-based, in other words it involves making choices. We have been taught that decision-makers compile a list of decision alternatives, which they evaluate with one or several criteria, often subject to uncertain states of nature. Then they choose the best or most preferred alternative from this list, using some appropriate decision rule. In case of uncertainty, the most common decision rule corresponds to maximizing expected utility. Raiffa’s book Decision Analysis is a wonderful example. In case of riskless choice under multiple criteria, the decision rule may simply be a weighted average, where the weights represent the ‘importance’ of the criteria. Students of Decision Analysis are taught that the decision-maker knows all decision alternatives and can quantitatively evaluate them in terms of relevant criteria. Alternatively, one can implicitly define the decision alternatives via a mathematical model. In this case we talk about Multiple Criteria Decision Making or optimization. In either case, the choice from the available decision alternatives is open.

Date: 2020
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DOI: 10.1007/978-3-030-49459-9_1

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