Classifications Of Decision Making

Decision making under uncertainty:

•      Decision making under uncertainty is formulated exactly in the same way as decision making under risk, only difference is that no probability to each strategy is attached.
•       Let us make a comparative table to compare the three, i.e. decision making under certainty, risk, and uncertainty.

•       In decision making under uncertainty, remember that no probabilities are attached to set off the states of nature.
•         Sometimes we may have only positive elements in the given matrix, indicating that the company under any circumstances will have profit only.
•        Sometimes, we may have negative elements, indicating potential loss.
•       While solving the problem of decision making under uncertainty, we have two approaches:
•        The first one is pessimistic approach and the second one is optimistic approach. Let us examine this by solving a problem.

Criterion if optimism:

•   Here we determine the best possible outcome in each strategy, and then identify the best of the best outcome in order to select the optimal strategy.
•   In the table given below the best of the best iswritten in the left hand side margin.