Decision model

# Decision model

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Encyclopedia
A decision
Decision making
Decision making can be regarded as the mental processes resulting in the selection of a course of action among several alternative scenarios. Every decision making process produces a final choice. The output can be an action or an opinion of choice.- Overview :Human performance in decision terms...

method
is an axiom
Axiom
In traditional logic, an axiom or postulate is a proposition that is not proven or demonstrated but considered either to be self-evident or to define and delimit the realm of analysis. In other words, an axiom is a logical statement that is assumed to be true...

atic system that contains at least one action axiom
Action axiom
An action axiom is an axiom that embodies a criterion for recommending action. Action axioms are of the form "IF a condition holds, THEN the following should be done." Decision theory and, hence, decision analysis are based on the maximum expected utility action axiom...

.

Formulation
Formulation
Formulation may refer to:* Clinical formulation* Formulations * Formulation science* Pharmaceutical formulation:** Galenic formulation* Pesticide formulation...

is the first and often most challenging stage in using formal decision methods (and in decision analysis
Decision analysis
Decision analysis is the discipline comprising the philosophy, theory, methodology, and professional practice necessary to address important decisions in a formal manner...

in particular). The objective of the formulation stage is to develop a formal model of the given decision.

Evaluation
Evaluation
Evaluation is systematic determination of merit, worth, and significance of something or someone using criteria against a set of standards.Evaluation often is used to characterize and appraise subjects of interest in a wide range of human enterprises, including the arts, criminal justice,...

is the second and most algorithm
Algorithm
In mathematics and computer science, an algorithm is an effective method expressed as a finite list of well-defined instructions for calculating a function. Algorithms are used for calculation, data processing, and automated reasoning...

ic stage in using formal decision methods. The objective of the evaluation stage is to produce a formal recommendation (and its associated sensitivities) from a formal model of the decision situation.

Appraisal is the third and last stage in using formal decision methods. The objective of the appraisal stage is for the decision maker to develop insight into the decision and determine a clear course of action. Much of the insight developed in this stage results from exploring the implications of the formal decision model developed during the formulation stage (i.e., from mining the model). Central to these implications is the formal recommendation for action calculated during the evaluation stage. Other implications include various forms of sensitivity
Sensitivity and specificity
Sensitivity and specificity are statistical measures of the performance of a binary classification test, also known in statistics as classification function. Sensitivity measures the proportion of actual positives which are correctly identified as such Sensitivity and specificity are statistical...

of the recommendation to selected variables in the model. Additional insight is obtained by exposing key aspects of the reasoning that led to the formal decision model (i.e., by justifying the model). Possible actions following the appraisal stage include implementing the recommended course of action, revising the formal model and reevaluating it, or abandoning the analysis and doing something else.

Justifying a decision model is the action of exploring and explaining the reasoning that led to the formulation of a particular decision model.

Mining a decision model is the action of extracting information (e.g., sensitivity, value of information
Value of information
Value of information is the amount a decision maker would be willing to pay for information prior to making a decision.-Similar terms:...

, and value of control
Value of control
The value of control is a quantitiative measure of the value of controlling the outcome of an uncertainty variable. Decision analysis provides a means for calculating the value of both perfect and imperfect control. The former value, informally known as the value of wizardry, is an upper bound for...

) from a given decision model.