The Magnitude of Errors in Proximal Multiattribute Decision Analysis with Probabilistically Dependent Attributes

James L. Corner and Craig W. Kirkwood
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James L. Corner: Department of Management Systems, University of Waikato, Hamilton, New Zealand
Craig W. Kirkwood: Department of Management, Arizona State University, Tempe, Arizona 85287-4006

Management Science, 1996, vol. 42, issue 7, 1033-1042

Abstract: This paper investigates the accuracy of an approximation procedure for evaluating alternatives under uncertainty with multiple evaluation attributes. This approximation uses only the first two moments of the probability distributions for the alternatives, and hence it can substantially reduce the amount of information which must be collected in order to evaluate alternatives when evaluation attributes are probabilistically dependent. The accuracy of the approximation is investigated by comparing results from using it with exact calculations for a variety of situations representative of those found in decision analysis practice. This investigation shows that the approximation is accurate for situations representative of many decision analysis applications. However, caution is needed in applying the approximation in some situations where it may give inaccurate results. Characteristics of cases where the approximation is less accurate are presented.

Keywords: multiattribute utility theory; multiobjective decision analysis; evaluation; decision analysis; approximations (search for similar items in EconPapers)
Date: 1996
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