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Decision Analysis by TreeAge
Spreadsheet and other software have made it possible to apply the speed and precision of a personal computer to the basic tasks of business analysis. Taking advantage of the computer's accuracy and speed, analysts attempt to calculate the effects of scenario upon scenario, often producing reports in such volume that decision makers begin to long for the day of pencil and paper and problems of too little, rather than too much, information. The difficulty with spreadsheet analysis is that decision makers, whether they are business managers, government regulators, engineers, economists, attorneys or physicians, generally face problems which require more than computational ability: what is the probability that a particular R&D project will be successful; what is the optimal price to bid in a competition to supply disk drives to a large computer manufac- turer; what is the settlement value of recently commenced, treble- damage antitrust litigation; should a promising, but risky, treatment for AIDS be cleared for use before clinical testing is complete? For these types of decisions, there are many factors to be analyzed, but in the end, the decision maker must make subjective judgments about the likelihood of particular scenarios, and make decisions based not only on costs and benefits, but also on assessments of risk. The analysis of these problems is seriously complicated by uncertainty because, invariably, the decision maker lacks control over the conse- quences of one or more of the scenarios under consideration. The appropriate way to deal with these problems is through a structured methodology which first puts the uncertainties into perspective.
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