| alternative | one of the choices available to the decision maker.
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| bounded rationality | limitations on decision-making caused by costs, human abilities, time, technology, and availability of information.
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| certainty | the event that will occur is known beforehand.
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| decision tree | a schematic representation of the available alternatives and their possible consequences.
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| event | see state of nature.
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| expected monetary value (EMV) criterion | the best expected value among the alternatives.
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| expected value | for an alternative, obtained by multiplying each payoff by the column probability and summing the products; the mean.
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| expected value of perfect information (EVPI) | the expected payoff assuming certainty minus the optimal payoff under risk; also the least expected value of the regret.
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| Laplace criterion | assign equal probabilities to all events, and choose the alternative with the highest expected value.
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| maximax criterion | an optimistic approach to decision making under uncertainty; select the alternative with the best single payoff.
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| maximin criterion | a pessimistic view of the possible outcomes of the decision process under uncertainty; select the alternative with the best of the worst payoffs.
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| minimax regret criterion | a cautious approach to decision making under uncertainty; the absolute value of the difference between the payoff associated with an alternative-event pair (A, E) and the highest payoff for any decision in the E column of the matrix.
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| opportunity loss | the difference between a given payoff and the best payoff for a state of nature.
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| payoff | for every alternative/state of nature combination, the associated profit, cost, etc.
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| payoff table | a two-way layout, the rows representing the decision-maker's alternatives and the columns nature's events; an entry in a cell of the matrix is the payoff associated with the corresponding event and alternative.
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| probability | see probability distribution.
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| probability distribution | a set of nonnegative numbers called probabilities, each probability represents the chance that its corresponding event will occur; the sum of the probabilities for all events is 1.00.
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| regret | see opportunity loss.
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| risk | there is a known probability distribution for the events.
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| Sensitivity analysis | determining the range of probability for which an alternative has the best expected payoff.
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| state of nature | an event that could occur, that would not be under the control of the decision maker.
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| suboptimization | the result of different departments each attempting to reach a solution that is optimal for that department, but not necessarily optimal for the entire firm.
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| uncertainty | the possible events that could occur are known, but the probability distribution is unknown.
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