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Exploring Relations Between Decision Analysis and Game Theory

Jules van Binsbergen () and Leslie Marx

Decision Analysis, 2007, vol. 4, issue 1, 32-40

Abstract: Many authors, including Cavusoglu and Raghunathan (2004. Configuration of detection software: A comparison of decision and game theory approaches. Decision Anal. 1(3) 131--148.) in this journal, have argued that proper modeling of the strategic interaction between players requires a game-theoretic approach as opposed to a decision-theoretic approach. We argue in this paper, however, that there are many environments in which decision analysis can deal with strategic interactions just as well, and we present equivalence results for such environments. These equivalence results allow the prescriptive decision analyst to use the standard tools that a sound decision analysis requires, including decision trees and sensitivity analysis, even when confronted with strategic settings. We further present two technical comments on the Cavusoglu and Raghunathan (2004) paper.

Keywords: paired decision analysis; decision tree; inspection game; detection software (search for similar items in EconPapers)
Date: 2007
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Handle: RePEc:inm:ordeca:v:4:y:2007:i:1:p:32-40