Decision making under uncertainty

  • How are decisions made under uncertainty?

    There is no possibility of knowing what could occur in the future to alter the outcome of your decision.
    You feel uncertainty about a situation.
    In the face of such uncertainty, you make certain assumptions about the situation.
    This provides a reasonable framework for decision-making..

  • How do humans make decisions when faced with uncertainty?

    Humans generally use two decision-making strategies when faced with uncertainty: exploitation and exploration.
    Exploitation involves frequently choosing options that are familiar and provide a higher certainty of reward.
    Exploration involves trying out choices that are unfamiliar..

  • What is decision making in the presence of uncertainty?

    Decision-making in the presence of risk and uncertainties is always challenging.
    Decision makers would like to evaluate the risks prior to their decisions to understand the ranges of possible outcomes and the significances of unintended consequences..

  • Making decisions under certainty
    Under conditions of certainty, accurate, measurable, and reliable information and knowledge on which you base your decisions are available to you.
    The cause-and-effect relationships are known.
    The future and outcome are highly predictable under conditions of certainty.
  • The decision maker attempts to avoid regret by selecting the decision alternative that minimizes the maximum regret.
    The equal likelihood ( or Laplace) criterion multiplies the decision payoff for each state of nature by an equal weight, thus assuming that the states of nature are equally likely to occur.
Many important problems involve decision making under uncertainty—that is, choosing actions based on often imperfect observations, with unknown outcomes. Designers of automated decision support systems must take into account the various sources of uncertainty while balancing the multiple objectives of the system.

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