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Decision Making Under Uncertainty—Basic Concepts and Techniques

In: Strategic Management Accounting in a Network Economy

Author

Listed:
  • Wingsun Li

    (Beijing Normal University & Hong Kong Baptist University—United International College)

Abstract

This chapter discusses how to make decisions under uncertainty. Decision-making is a fundamental role of management in corporations. In the business reality, the world is full of uncertainty, and management has to make decisions with incomplete information. There is always a risk associated with decision choices. How does management judge risk and evaluate decision options? Furthermore, what approaches can corporate management use to make a final choice? This topic is of paramount importance, and I plan to dedicate two chapters to it. In this chapter, I will first outline the framework of a decision-making model and explain how decision-making processes operate. The decision tree technique is found to be the most popular tool used for decision-making under uncertainty. I will elucidate the basic elements of a decision tree, how it works, how probability concepts are applied to approximate outcomes, and how it facilitates decision-making. Of course, there are more complicated concepts and techniques in decision-making that I will leave for discussion in Chapter 3 .

Suggested Citation

  • Wingsun Li, 2023. "Decision Making Under Uncertainty—Basic Concepts and Techniques," Management for Professionals, in: Strategic Management Accounting in a Network Economy, chapter 0, pages 19-41, Springer.
    • Handle: RePEc:spr:mgmchp:978-981-99-5253-3_2
    DOI: 10.1007/978-981-99-5253-3_2
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