Analysis of alternatives
Introduction
Decision analysis (DA) is the discipline that includes the philosophy, theory, methodology and professional practice necessary to address important decisions in a formal manner.
Decision analysis includes many procedures&action=edit&redlink=1 "Procedures(term) (not yet drafted)"), methods and tools for identifying, clearly representing, and formally evaluating the important aspects of a decision, for prescribing a recommended course of action by applying the maxim intended axiom of action") useful to a well-formed representation of the decision, and for translating the formal representation of the decision and its corresponding recommendation into knowledge for decision-making and other interested parties.
History and methodology
Graphical representation of decision analysis problems commonly use influence diagrams and decision trees. Both tools represent the alternatives available to decision makers, the uncertainty they face, and evaluation measures that represent how well they achieve their objectives in the final result. Uncertainties are represented through probabilities. The attitude of risk decision makers is represented by utility functions and their attitude toward trade-offs between conflicting objectives. They may make use of multi-attribute value functions or multi-attribute utility functions (if risk is involved).
In some cases, utility functions can be replaced by the probability of reaching uncertain aspiration levels. Proponents of decision analysis choose that decision whose consequences have the maximum expected utility (or that maximize the probability of reaching the uncertain aspiration level).
Decision analytical methods are used in a wide variety of fields, including business (planning, marketing and negotiation), environmental remediation), health care research and management, energy exploration, litigation and conflict resolution, etc.
Decision analytics are used by major companies to make multi-million dollar capital investments. In 2010, Chevron won the Decision Analysis Society Practice Award for the use of decision analysis in all major decisions. In a video detailing Chevron's use of decision analysis, Chevron Vice President George Kirkland points out that decision analysis is a part of how Chevron does business for one simple, but powerful, reason: it works..