Term
Categories of Decision Situations 

Definition
Situations in which:
 probabilities cannot be assigned to future occurrences
 Situations in which probailites can be assigned



Term

Definition
is a means of organizing a decision situation, presenting the payoffs from different decisions given the various states of nature.



Term

Definition
the decision maker selects the decision that will result in the maximum of maximum payoffs; an optimistic criterion.



Term

Definition
the decision maker selects the decision that will reflect the maximum of the minimumpayoffs; a pessimistic criterion.



Term

Definition
the difference between the payoff from the best decision and all other decision payoffs.



Term

Definition
by selecting the decision alternative that minimizes the maximum regret.



Term

Definition
is a compromise between the maximax and maximin criteria 


Term
coefficient of optimism, a:


Definition
is a measure of the decision maker’s optimism 


Term
Hurwicz criterion multiplies:


Definition
the best payoff by aand the worst payoff by 1 a, for each decision, and the best result is selected



Term
equal likelihood( or Laplace) criterion


Definition
multiplies the decision payoff for each state of nature by an equal weight, thus assuming that the states of nature are equally likely



Term

Definition
one that has a better payoff than another decision under each state of nature. 


Term
appropriate criterion is dependent on: 

Definition
the “risk” personality and philosophy of the decision maker 


Term

Definition
computed by multiplying each decision outcome under each state of nature by the probability of its occurrence.



Term
expected opportunity loss: 

Definition
is the expected value of the regret for each decision 


Term
expected value of perfect information (EVPI): 

Definition
is the maximum amount a decision maker would pay for additional information.



Term

Definition
expected value given perfect information minus the expected value without perfect information 


Term

Definition
expected opportunity loss (EOL) for the best decision. 


Term
That is it for chapter 8 notes 

Definition

