RETURN TO DECISION ANALYSIS SYLLABIDecision Making with Risk and Multiple Objectives
MSC 380.13 -- Spring 1994
| Instructor: |
James S. Dyer Office: CBA 5.218 Hours: Tuesday, 4-5 and by appointment Phone: 471-5278 |
| Prerequisites: |
MBA level core courses in economics, management
science, and statistics. |
| Description: |
This seminar provides a comprehensive survey
of the theory and methods applicable to the analysis of decisions that
involve risk and multiple objectives. The emphasis of the course will be
on developments from the fields of decisions analysis and utility theory.
This theoretical development will be illustrated through the discussion
of several real-world applications. |
| Specific topics: |
1. Ordinal utility theory (ideas of rational
behavior) 2. Measurable utility theory (strength of preference) 3. Risky utility theory (rational behavior and risk) 4. Subjective probabilities 5. Multiple criteria: the ordinal case| 6. Multiple criteria: the risky case 7. Multiple criteria: strength of preference 8. A behavioral critique of utility theory All of these topics will be applied to real applications. |
| Guest Speakers: |
The possibility of guest speakers from industry
and from other universities is being investigated. |
| Grading: |
Weekly exercises will be weighted equally with
a final paper. |
| Textbooks: |
Keeney and Raiffa, Decisions with Multiple
Objectives, Cambridge University Press, 1976. Copies of the other required reading will be available on two-hour reserve in the PCL. |
MSC 380.13
Reading Assignments
Spring 1994
| Session |
Date |
Topics |
Readings |
| 1 |
Jan. 18 |
Decision making under certainty |
von Winterfeldt and Edwards,Decision Analysis
and Behavioral Research, Sections 7.1-7.3.
Fishburn, Utility Theory for Decision Making, Ch. 2, 3, and 6
(Optional). |
| 2 |
Jan. 25 |
Additive Expected Utility |
Marshak and Radner, Economic Theory of Teams, pp.
9-21 |
| 3 |
Feb. 1 |
Additive Expected Utility |
Marshak and Radner, pp. 21-44.
Sarin, "Analytical Issues in Decision Methodology," Organization
and Decision Theory, Horowitz, (ed.) 1990, Sec. 1. |
| 4 |
Feb. 8 |
Risk Aversion and Utility Function Assessment
|
Keeney and Raiffa, Ch. 4
Clemen, "Making Hard Decisions" Ch. 13, 14 Bell, "One-Switch Utility Functions and a Measure of Risk,"
Management Science, 34, 12, Dec. 1988. |
| 5 |
Feb. 15 |
Critique of Expected Utility |
Sarin, Sec. 2. |
| 6 |
Feb. 22 |
Generalizations of Expected Utility |
Sarin, Sec. 3-6 (omit Sec.3.3). |
| 7 | March 1 | Generalizations of Expected Utility |
Fishburn, Nonlinear Preference and
Utility Theory, Ch.3 (optional) |
MSC 380.13
Assignment
| Session |
Date |
Topics |
Readings |
| 8 |
March 8 |
Perceptions of Risk |
Fishburn, "Risk as Probable Loss," Management
Science, Vol. 30, No.4, April 1984.
Luce, "Several Possible Measures of Risk," Theory and Decision, Vol.12, pp. 217-228. Correction, 13, 381 Sarin, "Some Extensions of Luce's Measures of Risk," Theory and Decision , Vol.15, pp. 231-245. Camerer and Weber, "Recent Developments in Modeling Preferences:
Ambiguity and Uncertainty," Journal of Risk and Uncertainty,
Vol.5, 1992, pp. 325-370. |
| 9 |
March 22 |
Preferences and Risk |
Dyer and Sarin, "Relative Risk Aversion," Management
Science, Vol. 28, No. 8, August 1982.
Becker and Sarin, "Lottery Dependent Utility," Management Science, Nov. 1987, pp. 1367-1382. Howard, "In Praise of the Old Time Religion," Utility Theories, Edwards (ed.), 1992. Sarin, "What Now for Generalized Utility Theories," Edwards
(ed.) 1992. |
| 10 |
March 29 |
Multiattribute Models: the case of Certainty
|
Keeney and Raiffa, Ch. 1, 2, & 3. |
MSC 380.13
Assignements
| Session |
Date |
Topics |
Readings |
| 11 |
April 5 |
Multiattribute Models: the Analytic Hierarchy
Procedure |
Harker and Vargas, "The Theory of Ratio Scale Estimation:
Saaty's Analytic Hierarchy Measure," Management Science, Vol.
33, No. 11, 1987.
Dyer, "Remarks on the Analytic Hierarchy Process," Management Science, Vol.36, No.3, March 1990. Salo and Hamalainen, "Preference Assessment by Imprecise Ratio
Statements," Operations Research, Vol.40, No.6, Nov.-Dec. 1992.
|
| 12 |
April 12 |
Multiattribute Models with Two Attributes |
Keeney and Raiffa, Ch. 5, Sec. 1-10
Bordley and Hazen, "Nonlinear Utility Models Arising from Unmodeled Small World Correlations," Management
Science, Vol. 38, No. 7, July, 1992. |
| 13 |
April 19 |
Multiattribute Models with n Attributes |
Keeney and Raiffa, Ch.6,Sec.1-9 Harvey, "Multiattribute
Risk Linearity," Management Science,
Vol. 39, No. 3, March 1993. |
| 14 |
April 26 |
Multiattribute Models : Measurable Functions
|
Dyer and Sarin, "Measurable Multiattribute Value Functions,"
Operations Research, July-August 1979.
von Winterfeldt and Edwards,Ch.9. |
| 15 |
May 3 |
Multiattribute Software and Implementation
|
Dyer, Fishburn, Steuer, Wallenius, Zionts, "Multiple
Criteria Decision Making, Multiattribute Utility Theory: The Next Ten Years,"
Management Science, Vol. 38, No. 5, May 1992. |