Target-Oriented Decision Analysis with Different Target Preferences

Decision maker’s behavioral aspects play an important role in human decision making, and this was recognized by the award of the 2002 Nobel Prize in Economics to Daniel Kahneman. Target-oriented decision analysis lies in the philosophical root of bounded rationality as well as represents the

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-shaped value function. In most studies on target-oriented decision making, monotonic assumptions are given in advance to simplify the problems, e.g., the attribute wealth. However, there are three types of target preferences: “the more the better” (corresponding to benefit target preference), “the less the better” (corresponding to cost target preference), and equal/range targets (too much or too little is not acceptable). Toward this end, two methods have been proposed to model the different types of target preferences: cumulative distribution function (cdf) based method and level set based method. These two methods can both induce four shaped value functions:

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-shaped, inverse

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-shaped, convex, and concave, which represents decision maker’s psychological preference. The main difference between these two methods is that the level set based method induces a steeper value function than that by the cdf based method.