Quantitative Techniques: Theory and Problems

THREE TYPES OF PROBLEMS IN DECISION MAKING UNDER DIFFERENT ENVIRONMENT

Usually we may have one of the three environments with regard to the state of outcome of a problem, namely, deterministic or state of certainty; stochastic or risk environment and finally the environment of uncertainty. Thus, the three types of problems in decision making under the above mentioned environments are discussed below:

1. Deterministic Problems are those problems in which each course of action results in only one outcome. For such problems, the probability of each outcome is known to be believed as either equal to unity or zero. Because of this, the criterion or the measure of performance used in deterministic problems is that of the maximisation of utility.
2. Stochastic ...