13. Decision Making Under Risk

  1. Paolo Brandimarte

Published Online: 24 MAY 2011

DOI: 10.1002/9781118023525.ch13

Quantitative Methods: An Introduction for Business Management

Quantitative Methods: An Introduction for Business Management

How to Cite

Brandimarte, P. (2011) Decision Making Under Risk, in Quantitative Methods: An Introduction for Business Management, John Wiley & Sons, Inc., Hoboken, NJ, USA. doi: 10.1002/9781118023525.ch13

Publication History

  1. Published Online: 24 MAY 2011
  2. Published Print: 4 APR 2011

ISBN Information

Print ISBN: 9780470496343

Online ISBN: 9781118023525

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Keywords:

  • decision making under risk;
  • decision trees;
  • expected value;
  • linear programming models;
  • multistage stochastic programming;
  • random variables;
  • risk measures;
  • two-stage stochastic linear programming

Summary

This chapter first describes the formalization of decision trees. Then, it considers the attitude toward risk. Much theory concerning random variables revolves around expected values. The chapter introduces concepts related to utility theory and risk measures. It also considers the extension of optimization models, namely, linear programming models, to decision making under risk. Further, the chapter considers two-stage stochastic linear programming, which is extended to the multistage case. Finally, the chapter outlines some further developments related to robustness and regret.

Controlled Vocabulary Terms

expected value; random variables