Engineering Decision Making and Risk Management
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Preface xi
1 Introduction to Engineering Decision Making 1
1.1 Introduction 1
1.2 Decision Making in Engineering Practice 4
1.3 Decision Making and Optimization 5
1.4 Decision Making and Problem Solving 6
1.5 Decision Making and Risk Management 7
1.6 Problems in Decision Making 8
1.7 The Value of Improving Decision Making 8
1.8 Perspectives on Decision Making 9
Exercises 10
References 12
2 Decision-Making Fundamentals 15
2.1 Decision Characteristics 16
2.2 Objectives in Decision Making 17
2.3 Influence Diagrams 22
2.4 Rationality 24
2.5 Dominance 29
2.6 Choice Strategies 31
2.7 Making Tradeoffs 33
2.8 Reframing the Decision 34
2.9 Risk Acceptance 36
2.10 Measurement Scales 37
Exercises 39
References 46
3 Multicriteria Decision Making 51
3.1 Pugh Concept Selection Method 54
3.2 Analytic Hierarchy Process 56
3.3 Multiattribute Utility Theory 62
3.4 Conjoint Analysis 67
3.5 Value of a Statistical Life 70
3.6 Compensation 71
3.7 The Impact of Changing Weights 74
Exercises 76
References 81
4 Group Decision Making 85
4.1 Ranking 88
4.2 Scoring and Majority Judgment 92
4.3 Arrow's Impossibility Theorem 95
Exercises 96
References 99
5 Decision Making Under Uncertainty 101
5.1 Types of Uncertainties 103
5.2 Assessing a Subjective Probability 105
5.3 Imprecise Probabilities 107
5.4 Cumulative Risk Profile and Dominance 108
5.5 Decision Trees: Modeling 110
5.6 Decision Trees: Determining Expected Values 112
5.7 Sequential Decision Making 114
5.8 Modeling Risk Aversion 115
5.9 Robustness 120
5.10 Uncertainty Propagation: Sensitivity Analysis 125
5.11 Uncertainty Propagation: Method of Moments 127
5.12 Uncertainty Propagation: Monte Carlo Simulation 129
Exercises 132
References 138
6 Game Theory 141
6.1 Game Theory Basics 144
6.2 Zero-Sum Games 144
6.3 Optimal Mixed Strategies for Zero-Sum Games 145
6.4 The Minimax Theorem 147
6.5 Resource Allocation Games 147
6.6 Mixed Motive Games 148
6.7 Bidding 151
6.8 Stackelberg Games 152
Exercises 153
References 157
7 Decision-Making Processes 161
7.1 Decision-Making Contexts 164
7.2 Technical Knowledge and Problem Consensus 165
7.3 Optimization: Search and Evaluation 169
7.4 Diagnosing Risk Decision Situations 170
7.5 Values and Ethics 171
7.6 Systematic Decision-Making Processes 172
7.7 The Decision-Making Cycle 174
7.8 The Analytic-Deliberative Process 175
7.9 Concept Selection 176
7.10 Decision Calculus 177
7.11 Recognition-Primed Decision Making 178
7.12 Heuristics 178
7.13 Unconscious Decision Making 179
7.14 Search 179
7.15 Types of Search in Practice 183
7.16 Secretary Problem 185
7.17 Composite Decisions 187
7.18 Separation 189
7.19 Product Development Processes 194
Exercises 197
References 200
8 The Value of Information 207
8.1 The Expected Value of Perfect Information 212
8.2 The Expected Value of Imperfect Information 214
8.3 Experimentation to Reduce Ambiguity 221
8.4 Experimentation to Compare Alternatives 225
8.5 Experimentation to Compare Alternatives with Multiple Attributes 228
Exercises 232
References 237
9 Risk Management 239
9.1 Risk Management Process 244
9.2 Potential Problem Analysis 247
9.3 Risk Management Guide for DOD Acquisition 252
9.4 Risk Management at NASA 253
9.5 Precursors 254
9.6 Warnings 257
9.7 Risk Communication 259
9.8 Managing the Risk of a Bad Decision 265
9.9 Learning from Failures 271
9.10 Transforming Failure Information 275
Exercises 276
References 282
10 Decision-Making Systems 289
10.1 Introduction to Decision-Making Systems 291
10.2 Mechanisms of Organization Influence 292
10.3 Roles in Decision-Making Systems 293
10.4 Information Flow 296
10.5 The Structure of Decision-Making Systems 297
10.6 Product Development Organizations 298
10.7 Information Flow in Product Development 299
10.8 The Design Factory 302
Exercises 302
References 303
11 Modeling and Improving Decision-Making Systems 307
11.1 Modeling Decision-Making Systems 309
11.2 Rich Pictures 310
11.3 Swimlanes 311
11.4 Root Definitions 313
11.5 Conceptual Models 315
11.6 Models of Product Development Organizations 317
11.7 Improving Decision-Making Systems 317
11.8 An Integrative Strategy 319
Exercises 325
References 326
Index 331
