Decision making theory and decision tree
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Definitions :---
The body of knowledge concerned with making selection from a range of alternative possible actions.
Explanations :---
Decision theory is in practice an extremely confusing term to managers because there are many different views about the subject-matter included. Some say that decision theory can be equated with statistics since they say statistics is the science of decision-making under uncertainty. There is, therefore, a number of textbooks with decision theory or sometimes statistical decision theory in their titles and these books are straightforward statistics textbooks. Others regard decision theory as both science and art and there are several textbooks on The Art of Judgementthat rarely mention statistics or statistical concepts. Notable are the writings of Sir Geoffrey Vickers and H A Simon. Other writers treat the subject as a part of operations research and draw on different branches of pure and applied mathematics and statistics for their material. Typically, these books include utility theory, decision rules (minimax etc), the Bayes theorem, some probability theory, some game theory, some set theory (Boolean algebra, symbolic logic) and truth tables. Yet others equate the subject with management techniques and include industrial democracy and network analysis in their belief.
Decision theory practitioners, in order to improve the quality of their decisions, endeavour to find out the processes that take place when decisions are made, and always seek to find ways of teaching people to make decisions. There are two kinds of decision: programmed and unprogrammed.
Programmed decisions are those taken according to rules in highly structured organisations, for example, the fighting and civil services and, in industry, production areas. These decisions can be taken by relatively junior staff, and some can be executed by computers or even by servo-mechanisms – the speed-control mechanism on a clockwork motor, for instance.
Unprogrammed, or free-ranging decisions, deal with new areas and new problems, and are the main pre-occupation of senior managers – or at least they should be!
By classifying decisions managers can free themselves more for creative work, for planning and for innovation. Application of decision theory can indicate the level at which decisions should be made, can indicate the technique appropriate to the solution of the problem on which decisions have to be made, and can provide a valuable lead as to which sectors in a business can be computerised
The body of knowledge concerned with making selection from a range of alternative possible actions.
Explanations :---
Decision theory is in practice an extremely confusing term to managers because there are many different views about the subject-matter included. Some say that decision theory can be equated with statistics since they say statistics is the science of decision-making under uncertainty. There is, therefore, a number of textbooks with decision theory or sometimes statistical decision theory in their titles and these books are straightforward statistics textbooks. Others regard decision theory as both science and art and there are several textbooks on The Art of Judgementthat rarely mention statistics or statistical concepts. Notable are the writings of Sir Geoffrey Vickers and H A Simon. Other writers treat the subject as a part of operations research and draw on different branches of pure and applied mathematics and statistics for their material. Typically, these books include utility theory, decision rules (minimax etc), the Bayes theorem, some probability theory, some game theory, some set theory (Boolean algebra, symbolic logic) and truth tables. Yet others equate the subject with management techniques and include industrial democracy and network analysis in their belief.
Decision theory practitioners, in order to improve the quality of their decisions, endeavour to find out the processes that take place when decisions are made, and always seek to find ways of teaching people to make decisions. There are two kinds of decision: programmed and unprogrammed.
Programmed decisions are those taken according to rules in highly structured organisations, for example, the fighting and civil services and, in industry, production areas. These decisions can be taken by relatively junior staff, and some can be executed by computers or even by servo-mechanisms – the speed-control mechanism on a clockwork motor, for instance.
Unprogrammed, or free-ranging decisions, deal with new areas and new problems, and are the main pre-occupation of senior managers – or at least they should be!
By classifying decisions managers can free themselves more for creative work, for planning and for innovation. Application of decision theory can indicate the level at which decisions should be made, can indicate the technique appropriate to the solution of the problem on which decisions have to be made, and can provide a valuable lead as to which sectors in a business can be computerised
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