Structuring Decisions - Human Decision Making - Lecture Slides, Slides of Human-Computer Interaction Design

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Structuring Decisions

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Introduction

 Step 1: Identifying and Structuring the Values and Objectives

 Identifying issues that matter  Listing objectives and separating means and fundamental objectives  Specifying measures of fundamental objectives

 Step 2: Structuring the Elements of Decision Situation into a

Logical Framework

 Structuring logic and time sequence among decisions, uncertain events, and consequences  Tools: influence diagrams and decision trees

 Step 3: Refining and Precisely Defining the Elements

 The decisions to be made and the available alternatives  Probability distributions of uncertain events through a combination of data analysis and expert judgment  Measures of consequences and tradeoffs

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Structuring Values and Objectives

 Categorizing Objectives

 Sort the list of objectives and group them into categories

 Removing Irrelevant Objectives

 Separating Means and Fundamental Objectives

 Means objectives are those helping to achieve other objectives  e.g. One objective of taking this class is to maximize your learning of decision analysis process  Fundamental objectives are those reflecting what we want to accomplish ultimately  e.g. One objective of going for a vacation is to maximize relaxation  Whether an objective is a means or fundamental objective can be a subjective judgment

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 Fundamental Objectives Hierarchy

 Upper levels represent more general objectives  Lower levels describe important elements of the more general levels  Lowest-level fundamental objectives are the basis on which consequences are measured

Structuring Values and Objectives (Cont’d)

A Fundamental Hierarchy of Vehicle Regulation

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Techniques for Organizing Objectives

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The Peach Tree Consumer Products Inc. has an opening for a summer

intern. Working under the supervision of a senior employee in the

marketing group, the intern would focus primarily on the development

of a market survey for certain of the company’s products. The

problem is how to find an appropriate individual to fill this slot.

Summer Intern Example

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 Boost Business Performance  Sell more products, maximize profit, increase market share, identify market niche

 Improve Work Environment  Bring in new energy, assist senior employee

 Improve the quality and efficiency of marketing activities  Maximize survey quality, minimize survey cost

 Better Personnel and Corporate Development  Lean updated techniques, free up employees for new assignment, try out prospective employee

 Increase the Engagement of Community Service  Financial aid, expose intern to real world, relationship with local colleges

Categorized Objectives:

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Influence Diagrams

Invest? (^) SucceedsVenture or Fails

Return on Investment

Computer Industry Growth

Overall Satisfaction

Decision Node (decisions to be made)

Chance Node (uncertain events)

Computation Node (intermediate consequence or computations)

Payoff Node (final consequence)

Influence Diagram of a Venture Capitalist’s Decision Problem

Consequence Nodes

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Influence Diagrams (Cont’d)

Relationships between nodes are symbolized with arrows or directed arcs

Distinctions are made here between sequence and dependence arcs only for teaching purposes. Once you are familiar with the differences, you can use solid arcs throughout the influence diagram like the convention used in the textbook

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Basic Influence Diagrams

 Basic Risky Decision

 Whether the potential gain in the risky choice is worth the risk

Investment Example

You have $2,000 to invest and the objective is to earn as high a return on your investment as possible. There are two alternatives: investing in a friend’s business or keeping the money in a savings account with a fixed interests rate. If you invest in the business, your return depends on the success of the business. You figure there could be two possible outcomes: the business is either widely successful earning you $3,000 beyond your initial investment (hence leaving you $5,000 in total) or a total flop, in which case you will lose all your money. On the other hand, if you put your money into a saving account, you will earn $200 in interest regardless of your friend’s business.

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Influence Diagram of the Investment Decision Problem

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Forecast Hurricane Path

Decision Consequence

Alternatives Evacuate Stay

Outcomes Hits Miami Misses Miami

Forecasts “Will hit Miami”

“Will miss Miami”

Choices Outcomes Consequences

Evacuate

Hits Miami Safety, High Cost

Misses Miami Safety, High Cost

Stay

Hits Miami Danger, Low Cost Misses Miami Safety, Low Cost

Influence Diagram of the Evacuation Decision Problem

sequence

dependence

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Basic Influence Diagrams (Cont’d)

 Sequential Decisions

 Two or more decisions that need to be made in sequence

Evacuation Example

Suppose in the example of hurricane-evacuation decision, you are waiting anxiously for the forecast as the hurricane is bearing down. Should you keep waiting for the forecast or leave immediately? In this case, you are facing a sequential decision situation. If you decide to wait for the forecast, then your next decision is whether you should evacuate or stay based on the forecast information.