Dynamic focus programming: A new approach to sequential decision problems under uncertainty

Peijun Guo

European Journal of Operational Research, 2022, vol. 303, issue 1, 328-336

Abstract: A new approach to sequential decision problems under uncertainty named dynamic focus programming is proposed with the focus theory of choice. In dynamic focus programming, there are two distinct evaluation systems: Positive and negative ones. Each possible path consisting of a decision sequence from the initial stage to the final stage and the associated states is examined. In the positive evaluation system, for each decision in the initial stage, if a path starting from it can bring about a relatively low total cost with a relatively high probability, then this path is selected as the positive focus path of this decision; based on the positive focus paths of all initial decisions, a decision maker chooses a most-preferred decision rule. In the negative evaluation system, for each decision in the initial stage, if a path starting from it can bring about a relatively high total cost with a relatively high probability, then this path is selected as the negative focus path of this decision; based on the negative focus paths of all initial decisions, a decision maker chooses a most acceptable decision rule. For a specific sequential decision problem, only one system is activated; as for which one works, it is strongly dependent on decision maker's personality and the framing. We apply dynamic focus programming to a real bidding decision-making problem: We obtain the optimal decision rule and gain the behavioral insights of the decision maker.

Keywords: Decision support systems; Dynamic programming; Sequential decision making; Focus theory of choice (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:303:y:2022:i:1:p:328-336

DOI: 10.1016/j.ejor.2022.02.044

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