6. Decision Theory

Decision Theory used in lot of engineering problems. This is because at every stage in an engineering project, there are lot of choices with lot of uncertainty associated with it and associated probabilities. In any industry, there are sequence of decisions the management has to make for the success of the company. It is true in the life of a person as well. All these decisions don’t have results with certainty. In other words, they are uncertain events. Hence, they are probabilistic. The decision theory is very important and has lot of usefulness associated with it. A typical decision tree has a root node, leaf nodes and branches. Irrespective of the type of the decision tree, it starts with a decision which is depicted in a box called the root node. Root and leaf nodes contain questions or some kind of criteria. Generally, these nodes appear as squares or circles. Squares depict decisions while circles represent uncertain outcomes. As stated above, since the decisions involved in a decision theory are uncertain, these have certain probabilities associated with them. A decision tree is very similar to a flow chart except the events listed in a flow chart have no uncertainty associated with it. Since, the final outcome of an engineering is not clear to start with, drawing a decision tree helps making a considered and optimal decision.