Probabilistic Decision-Making

Abstract

All the previous chapters of this book have been concerned with decision-making methods in which the consequences of a decision are predictable with certainty. The decision to dig a rectangular hole 2m × 1m × 1m deep on a flat site has the predictable consequence that 2m³ of excavated material will be produced. The unique consequence of the decision is unavoidable and plans can be made for disposing of this material which is certain to be produced. Not all decisions are like this. In some cases the consequences of a decision are governed by chance and a whole spectrum of possible outcomes may result from a single decision. The decision to sink a new borehole for oil does not have a predictably certain consequence. Oil may or may not be found and, if it is located, may or may not be present in sufficient volume to be exploitable. Since the consequences of the decision to sink the borehole are not unique but are governed by chance, subsequent planning is made more difficult. Special methods for planning under uncertainty are needed and this chapter describes several.