Decision Theory

Samuel Metcalfe
Flashcards by Samuel Metcalfe, updated more than 1 year ago
Samuel Metcalfe
Created by Samuel Metcalfe almost 6 years ago


SCott Kearney

Resource summary

Question Answer
Aleatoric Uncertainty Statistical uncertainy, from natural randomness e.g Earthquakes, Human Behaivour etc.
Epistemic Uncertainty Systematic uncertainty that comes from inaccuracies in understandings and models.
The three options of action with uncertainties - Ignore - Allow for using intuition (ie Engineering Judgement) - Scientific approach by using probabilistic and statistical analysis
Null Hypothesis A general statement or default position that there is no relationship between two measured phenomena
Type I Error Null Hypothesis is correct but is rejected - false positive
Type II Error Null Hypothesis is false but is not rejected - false negative
How to fix type I and type II errors respectively Type I - Increase your level of confidence (more precise) Type 2 - Descriptive testing (more detailed) ##clarify later##
Risk analysis A technique used to identify and assess factors that may jeopardize the success of a project or achieving a goal.
Risk Management Identifying the probability and consequence of making the wrong decisions
State of Nature (SON) The true value of an uncertain variable. It can never be determined with absolute confidence.
How to get and refine a SON You can estimate the SON through prior knowledge, and obtain additional information to refine it by doing experiments
Statistical Decision Theory Identifies the optimal decision when given a probability distribution for a state of nature
Preposterior Analysis When there are several possible tests identifying which one needs to be done. Tests should only be done id expected value of information is greater than obtaining cost.
Stages of Posterior Analysis 2 Stages in Decision Tree - Action and State
Stages of Preposterior analysis 4 Stages- Test (e), result (z), action(a), state (theta)
Allais' Paradox Actual observed choices are inconsistent with predictions from expected utility theory
Rational Decision-making approach Making decisions purely based on probability and consequence of each possible outcome
Utility Essentially the benefits something gives
Robust numerical measure of preference requirements - Has a scale ordering expected values Reflects decision makers subjective preferences
Standard Gamble Allows subjectivity, whilst preserving order of expected values. It is based on a decision tree, one leading to a certain outcome, the other a gamble.
Three different types of decision making criteria (alternatives to rational approach) - Criteria of Pessimism For each action find minimum utility. Choose action with largest - Criteria of Optimism For each action find maximum utility. Choose action with largest - Criterion of regret Make table of regret, choose action with smallest maximum regrt
Reliability Probability that component (or system) will function properly
Assumptions made in reliability engineering - All components are independent - No partial failures - Known reliabilities per component
Types of systems Series - System survives if all components survive Parallel - System survives if not all components fail
Birnbaum Reliability Improve the link with highest Reliability Importance In series - Improve the weaker link In parallel - Improve the stronger link
Henly and Kumamoto Improve link with highest Critical Importance In series - Either or In parallel - Improve weaker link
Show full summary Hide full summary


Philippine Accounting Standards 38: Intangible Assets
Philippine Accounting Standards 38: Intangible Assets
Joen Jacob Ramas
Key Terms
Asset Management
Samuel Metcalfe
Inspire Foundation
Evil Rulers & Their Deeds
Margaret Kramer
Laws/Consumer Issues and Agencies
matt martin
Much Ado About Nothing