Theory Management on Decision Making

Decision theory is an analytical tool used by decision-makers.

Theory management of decision-making, or decision theory, is a theory used and perfected by statisticians, economist and mathematicians. It provides managers with an analytical approach to decision-making.

Identification

Decision theory applies statistical and mathematical models to management decision-making. For example, managers can use the decision theory system to reach a verdict by collecting the necessary data from within the company, applying statistical and mathematical models against that data and then using the results to inform their choice.

Features

When presented with a choice, the user first assigns an outcome to each possible decision until he takes into account all possible combinations, constraints and limitations. The user then applies statistical and mathematical equations to the problem. The result of this number crunching will be a list of decision options with assigned probabilities of success.

Implementation

A decision support system (DSS) is the primary implementation system for decision theory applications. DSS is an information management system that collects and analyzes raw data from throughout a corporate enterprise and delivers useful information to managers. With this in mind, decision theory is the analytical engine that drives the DSS.

References

• BusinessDictionary.com: Decision Theory
• Washington State University: Statistical Decision Theory
• Reference for Business: Decision Support Systems

Resources

• Springer: Handbook on Decision Support Systems 2