Structured Decision Making

Structured Decision Making

By Andreas Michael Theodorou

Copyright 2015 Andreas Michael Theodorou

A Smashwords Edition

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License Notes:

This eBook is free for private use only. It may be copied, distributed, reposted, reprinted and shared, provided it appears in its entirety without alteration and the reader is not charged to access it.

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Table of Contents

Prologue

Chapter 1- Probability

Chapter 2 - Mathematical Expectation

CHAPTER 3 - Risk Analysis in Decision Making

Epilogue

About the Author

Other Titles by Andreas Michael Theodorou

Prologue

Except when sleeping and nearly at every single moment in life, one is called to make a decision or select an option out of a range of options, so that one may successfully overcome adversities or obstacles blocking the way forward. Whatever is decided has an an effect or impact, small, big or unimportant on one’s future. Beneficial decisions brighten the life-path and most of the time bring success, while thoughtless or damaging ones place obstacles in one’s way and may block one’s attempts to achieve one’s plan and desires in life. Due to the importance of decisions, one needs to be careful so that they are not derived through a haphazard evaluation method, at random or without all possible after-effects taken under serious consideration. It is therefore necessary that a structured way of evaluating the available information be devised, removing, if possible, emotions, feelings and false perceptions which can distort proper and unbiased thinking

The objective of this short publication is to present, explain and analyze a formal method of evaluating data, so that people, especially those involved in high risk decision making, reach the most beneficial conclusion in a logical and structured manner. For this purpose, it is necessary that three concepts are introduced, at elementary level. These are the concepts of probability, of mathematical expectation and of risk analysis. The following Chapters provide basic but adequate information and examples of how these concepts are utilized in order to provide objective indicators and pointers which facilitate structured decision making. These concepts find applications in many fields including statistical analysis, gaming, financial investments, insurance and many others. One requires extensive knowledge of advanced mathematics in order to fully comprehend this wide spectrum of applications, however for the discussion in this book this requirement has been bypassed to a great extent, without affecting the overall understanding of the subject. This was possible because the subject of statistical analysis, which requires the use of combinational theory and advanced calculus, is not directly used in the structured decision making process. It is hoped that the elementary introduction into these useful concepts will not only provide the correct platform for beneficial and profitable decision making but it will also trigger one’s interest to delve deeper and study further their application in other spheres of daily life.

Back to Table of Contents

CHAPTER 1- Probability

The likelihood of a particular event happening, when the same situation arises a great number of times, is approximated by the ratio of the number of the outcomes corresponding to the event happening, over the total number of the situation repetitions. This ratio is usually expressed as a percentage and is called the probability of the event materializing. If the probability p of the event taking place is known, it is obvious that the probability q of the event not taking place is also known and can be readily calculated from the simple formula:

q = 100 - p

If for example a particular situation has