Handbook of Decision Analysis

A one–of–a–kind guide to the best practices in decisionanalysis

Decision analysis provides powerful tools for addressing complexdecisions that involve uncertainty and multiple objectives, yetmost training materials on the subject overlook the soft skillsthat are essential for success in the field. This unique resourcefills this gap in the decision analysis literature and featuresboth soft personal/interpersonal skills and the hard technicalskills involving mathematics and modeling.

Readers will learn how to identify and overcome the numerouschallenges of decision making, choose the appropriate decisionprocess, lead and manage teams, and create value for theirorganization. Performing modeling analysis, assessing risk, andimplementing decisions are also addressed throughout. Additionalfeatures include:

Key insights gleaned from decision analysis applications andbehavioral decision analysis research Integrated coverage of the techniques of single– andmultiple–objective decision analysis Multiple qualitative and quantitative techniques presented foreach key decision analysis task Three substantive real–world case studies illustrating diversestrategies for dealing with the challenges of decision making Extensive references for mathematical proofs and advancedtopics

The Handbook of Decision Analysis is an essentialreference for academics and practitioners in various fieldsincluding business, operations research, engineering, and science.The book also serves as a supplement for courses at theupper–undergraduate and graduate levels.

List of Figures ix

List of Tables xiii

Foreword xv

Preface xxi

Acknowledgments xxv

About the Authors xxvii

Acronyms xxxi

1 Introduction to Decision Analysis 1
Gregory S. Parnell and Terry A. Bresnick

2 Decision–Making Challenges 22
Terry A. Bresnick and Gregory S. Parnell

3 Foundations of Decision Analysis 46
Gregory S. Parnell and Steven N. Tani

4 Decision Analysis Soft Skills 68
Terry A. Bresnick and Gregory S. Parnell

5 Use the Appropriate Decision Process 92
Steven N. Tani and Gregory S. Parnell

6 Frame the Decision Opportunity 110
Steven N. Tani and Gregory S. Parnell

7 Craft the Decision Objectives and Value Measures 127
Gregory S. Parnell, Terry A. Bresnick, and Eric R. Johnson

8 Design Creative Alternatives 149
Steven N. Tani and Gregory S. Parnell

9 Perform Deterministic Analysis and Develop Insights 166
Eric R. Johnson, Gregory S. Parnell, and Steven N. Tani

10 Quantify Uncertainty 227
Eric R. Johnson and Steven N. Tani

11 Perform Probabilistic Analysis and Identify Insights 248
Eric R. Johnson and Steven N. Tani

12 Portfolio Resource Allocation 291
Terry A. Bresnick, Eric R. Johnson, and Gregory S. Parnell

13 Communicating with Decision Makers and Stakeholders 320
Gregory S. Parnell and Terry A. Bresnick

14 Enable Decision Implementation 340
Terry A. Bresnick and Gregory S. Parnell

15 Summary of Major Themes 351
Gregory S. Parnell

Appendix A: Probability Theory 362
Steven N. Tani

Appendix B: Influence Diagrams 374
Steven N. Tani and Gregory S. Parnell

Appendix C: Decision Conferencing 381
Terry A. Bresnick

Index 392

GREGORY S. PARNELL, PhD, is Professor of SystemsEngine–ering at the United States Military Academy at West Pointand Executive Principal Analyst with Innovative Decisions, Inc.

TERRY A. BRESNICK, MBA, is Cofounder of InnovativeDecisions, Inc. and President of Innovative Decision Analysis,Inc.

STEVEN N. TANI, PhD, is Partner and Fellow of StrategicDecisions Group.

ERIC R. JOHNSON, PhD, is Associate Director atBristol–Myers Squibb.