Return on Software: Maximizing the Return on Your Software Investment

Summary

This chapter showed how to use statistical approaches to incorporate uncertainty probabilities into a decision analysis.

In expected value decision making, the overall value of an alternative with multiple possible outcomes is the average of the random individual outcomes that would occur if that alternative were repeated a large number of times. The alternative with the highest expected value is chosen.

With expectation variance, the differing probabilities could themselves influence the decision. An alternative with lower expected value might be a better choice if it also has a much lower probability of a negative outcome.

Monte Carlo analysis generates random combinations of the input variables (estimated factors) and runs them through ...