Decision Making

Chapter 9 of your textbook provides most of the discussion on decision-making. However, we start this module with a few basic principles of decision making.

• It is critical to obtain upper management support for addressing a particular problem.
• Objectives from the planning process can often aid decisions.
• Attributes used to assess decision options (e.g., cost, risk) can also influence the decision.
• The development of alternatives (choices for how to solve a problem) can influence the decision.
• Attitudes towards risk can influence decisions.
• A critical aspect of decision making is to build in evaluation procedures during implementation
• Outcomes are the most important aspect of any evaluation.

Problems with Attributes and Objectives

1. What if one attribute (X₁) measures 2 objectives (O₁ and O₂)?

X1 = tons of SO2 emitted per year
O1 = minimize health impacts
O2 = minimize environmental impacts (acid rain)
 
Answer: change X1 to Oi (minimize SO2 emitted)

2. What if one objective (O₁) has 2 attributes ( X₁ and X₂)?

O1 = minimize environmental impacts
X1 = acres of farmland
X2 = # of rare species

Answer: make two objectives ( X₁ and X₂ become the two objectives)

3. What if attributes overlap?

O1 = minimize costs
O2 = minimize transportation
X1 = $ / ton of waste
X2 = miles of transport

Answer: redefine X₁ and O₁ (e.g., cost to develop facility or cost to treat waste)

4. What if attributes are incomplete?

O1 = minimize health impacts
X1 = # of deaths

Answer: find a better attribute

Breakeven Analysis

1. Decision Matrix: A table of attribute scores for each alternative.

Based on decision theory, the matrix tells us which alternative is most preferred. (e.g., "policy a" given below is most preferred because it has the highest total).

		Env. Attributes:
alternative policies	air quality index	water quality index	total
policy a	3	9	12
policy b	7	1	8

2. Breakeven Matrix:

Breakeven analysis can simplify decisions.  A breakeven matrix is a  
table of scores which, if individually substituted into the above 
decision matrix, would give the alternatives an equal total score. 
(i.e., "breakeven") **

		Env. Attributes:
alternative policies	air quality index	water quality index	total
policy a	1	5	12
policy b	11	5	8

* -- By definition, these indexes are scored 0 for the worst and 10 for the best.

** -- Breakeven tells us if changes in the decision matrix could affect our decision (that is, it tells us how sensitive the index scores are to our decision)

In the above breakeven matrix, 11 and -1 are impossible scores. Thus, changes or miscalculations in the air quality index are not likely to change our decision.

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