# Chapter 1

CHAPTER OVERVIEW 1. 1 INTRODUCTION This chapter presents preliminary discussions about decision that include short overview, relationship between decision and theoretical question with examples and theories or approach of decision as critical parts in discussing the decision subject. The goal of this presentation is the nurture of firm understanding on the essential tenets about decision. 2. 1 OVERVIEW OF DECISION THEORY In the simplest term, Decision Theory (DT) is theory about decisions. Academic discussion about decision theory is critical due to that there exist many theories about decision.
Knowing all the theories that underlying the decision made would enable one to at least:- realize the principle and methodological one follows, mechanisms and supports required for that principle and reach into a justifiable and firm decision. Within the decision theory, there are normative and descriptive theories or approaches with prescriptive appears as variation of normative theory. The variety of ways to conceptualizing and looking at decisions yield many different research cultures and traditions.
Some are heavily rely on mathematics, some explore psychological dimensions and others might focus on the methodological aspects of decision. 3. 1 DECISIONS AND THEORETICAL QUESTION ABOUT DECISION A decision is a resolution that one chooses from a variety of alternatives. Many formal conceptual definitions for decision are available. Examples are; i. a position arrived at after consideration ii. the identification of and commitment to a course of action iii. decision relates to the activity – to decide – as the final point f decision making process that has involved complex processes of problem solving From all these definitions, we learn that decision is stem from some theoretical questions or there must be some theoretical questions in the ground prior to making decision. In this sense, the theoretical questions are problem that requires resolution. The relationship between the decision and theoretical questions is inevitable since there would be no decision without problem. The following propositions are examples of theoretical problems and the decisions to all these propositions are relative.

What would I dress to lecture today? The decision made would depend on the frequent use of apparel, availability and readiness and perhaps suitability with activities to be conducted in the lecture session. Which restaurant would I go for lunch this afternoon? The decision might depend on the time available, attraction of dishes or other external influences such as colleagues or weather. Should I purchase imported or local car? Issues such as pride, price and value, maintenance, loan facility and other considerations will significantly influenced the purchasing decision.
In our everyday’s life, child or adult, man or woman, we face a series of heavy or light problems that seek for or involve decision. In this sense, theorizing about decision can be thought as theorizing about our daily activities. However, we limit decision theory to include those that worth attended and unstructured or ill-structured; and exclude those are straight forward and structured. This limitation led by that in any unstructured situations or problems, there exist a set of alternatives to choose from and one chooses in a systematic way, not in random.
The selection is often based on goal directed activities, and hence decision theory is concerned with goal-directed behavior in the presence of options. Decision theory has two goals i. e to describe how agents do make decisions (descriptive decision theory) and to prescribe how agents should make decisions (prescriptive decision theory). A third branch of decision theory, normative decision theory, tries to describe how a hypothetical, infinitely intelligent being would make decisions. 4. 1 NORMATIVE THEORY
A normative decision theory is a theory about how decisions would be made. In this theory, the norms or standard practice that a decision maker follows and acts in reaching a resolution is critical. It addresses the activities in making decision which involve some standard processes. Normative decision theory seeks to provide an axiomatic, consistent basis for decision making. Most of decision theory and/or analysis said to be normative or prescriptive rather than descriptive. It concerns with what people should do, with emphasis on procedural dimension.
Thus the tasks of identifying the best decision to take, assuming an ideal decision taker who is fully informed, ability to compute with perfect accuracy and fully rational would be vital in this theory. 5. 1 DESCRIPTIVE THEORY Descriptive decision theory attempts to explain what people actually do and what people are observed to do when making decision. In another word it explains the processes that must be going through by a decision maker. In this sense, descriptive theory attempts to know how decisions are made and explains what exactly occurs in human cognitive when they make decision.
In a descriptive study, the decision model is determined by the user’s behavior, and the goal is to obtain an accurate model of the user’s actual decision process. Descriptive approach requires a detailed and thorough understanding of the task that faces the decision maker. It is as important to understand the decision maker’s task, or “environment,” as it is to understand how she mentally processes information. Due to that descriptive theory is more heading toward cognitive thinking, reasoning and mental activities, it is capable to nurture a new idea, concept and knowledge which would assist in improvement of decision making.
In this way, descriptive theory concerned with describing human judgment and decision making in a scientific way. Descriptive models are evaluated according to their ability to reproduce the behavior of the decision maker. As descriptive theory deals with what people actually do and what people are observe to do, it simply an observation and description of “what happens” when people make decision. For example, we might observe people who are speaking some language, and simply record what they say and try to determine the rules, if any, that determine what they say; perhaps they sometimes use double-negatives, like ‘I don’t want no eggs’.
In such a case, we would simply observe what they do, and try to account for why it is they are doing that. This would be a descriptive grammar. In the context of ethics, we might undertake a descriptive ethical enquiry, trying to determine the principles that some person or group of people use when making their morally relevant decisions: perhaps they do whatever they feel like, or perhaps they do what they think will lead to the greatest overall happiness of people.
Whatever the details, the descriptive task would simply seek to determine what ethical principles, if any, are in fact being used by some person or group in their morally relevant behavior. 6. 1CONCLUSION This chapter introduces students to the tenets of DT that includes conceptual definition of DT, the decision and theoretical question about decision and the three major theories of decision i. e normative, descriptive and prescriptive. DT is a body of knowledge and related analytical techniques designed to help a decision maker choose among a set of alternatives in light of their possible consequences.
DT is applicable to conditions of certainty, risk, or uncertainty. In general, DT deals with human decision making in the extent of insufficient information and incomplete control over events. DT involves two entities i. e decision maker and an arbitrary nature. The decision maker performs analyses and cognitively chooses some courses of action in an optimal fashion. In this way DT lead to discussion of at least normative and descriptive theories or approaches that may facilitate decision maker in making decision. Normative theory is explanation about how decisions would be made.
Descriptive theory is an explanation what people actually do and what people are observed to do when making decision. Prescriptive theory is articulation of the correct principles that people ought to apply when making decision. POINT TO PONDER ? Main goal of decision theory is deciding which action to take ? Normative Theory tries to describe how a hypothetical, infinitely intelligent being would make decisions ? reasonably accurate account of how individuals actually make decisions under uncertainty ? Both normative and descriptive theories have significant role in decision making
ACTIVITIES Student should further explore; • The concept of decision theory • The realist, optimist, pessimist and opportunist views of decision • More conceptual definition of decision from the vast literature of DM • The concept of structured problem • The concept of unstructured/Ill-Structured Problem • The Concept of Normative Theory • The normative aspect of decision theory • The Concept of Descriptive Theory • The descriptive aspect of decision theory STUDY QUESTIONS PART A: DEFINITION Please define the following terms: 1. Decision Theory 2. Decision 3.
Theoretical Question 4. Normative Theory 5. Descriptive Theory PART B: SHORT ANSWER Answer the following questions: 1. Discuss the importance of decision theory. 2. How decision relate to our everyday’s life? 3. Discuss the normative approach of decision theory with examples. 4. Discuss the descriptive approach with examples. 5. Discuss the prescriptive approach with examples. FURTHER READING Bekker, H. , Thornton, J. G. , Airey, C. M. , Connelly, J. , Hewison, J. , Robinson, M. B. , Lilleyman, J. , MacIntosh, M. , Maule, A. J. , Michie, S. , Pearman, A. D. , (1999).
Informed decision making: an annotated bibliography and systematic review. Health Technology Assessment, 3(1). Bell, D. E, Raiffa, H & Tversky, A. (1995) Decision making: descriptive, normative and prescriptive interactions, USA: Cambridge University Press. Clemen, R. (1996). Making Hard Decisions: An Introduction to Decision Analysis, 2nd edition. Belmont CA: Duxbury Press. Doerr, K. H. & Mitchell T. R. , (1998). The Consequences of Role-conferred Bias and Base-rate Neglect, Decision Sciences Journal,  29(2)pp. 461-478 Grant, S and Van Zandt, T. (2008). Expected Utility Theory, In P.
Anand, P. Pattanaik and C. Puppe (Eds), Handbook of Rational and Social Choice, Oxford University Press. Hansson, S. O. (1994). Decision Theory : A Brief Introduction. Department of Philosophy and the History of Technology, Royal Institute of Technology (KTH). Stockholm. Keefer, D. L, Kirkwood, C. W. and Corner, J. L, (2004). Perspective on Decision Analysis Applications, 1990–2001, Decision Analysis, 1(1) pp. 4–22 Lichenstein, S. , & Slovic, P. (2006). The Construction of Preference. New York: Cambridge University Press. Mautner, T. (Ed) (1999). The Penguin Dictionary of Philosophy.
London: Penguin. Russo, J. E. and Carlson, K. A. 2002. Individual Decision-making. In: Weitz, , Wensley, (Eds. ), Handbook of Marketing, Sage, London, pp 371-408. Stewart, T. R. (1997). Forecast value: Descriptive decision studies. In R. W. Katz & A. H. Murphy (Eds. ), Economic value of weather and climate forecasts (pp. 147-181). New York: Cambridge University Press. Thagard, P. (2001. How to make decisions: Coherence, emotion, and practical inference. In E. Millgram (Ed. ), Varieties of practical inference . Cambridge, MA: MIT Press, pp355-371 Tupara, H. (2008).
Facilitating functional decision making in midwifery: lessons from decision theory. New Zealand College of Midwives Journal, Apr 1, 2008. ———————– 1 INTRODUCTION TO DECISION THEORY Introduction to Decision Theory Overview of decision theory Theoretical questions about decisions Normative approach Descriptive approach LEARNING OBJECTIVES: After studying this chapter, you should be able to: 1. Understand the concept of Decision Theory (DT) 2. Understand issues about the nature of decisions 3. Describe the concept of normative approach of DT 4. Describe the concept of descriptive approach of DT

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