Discuss the differences between decision making under certainty, under risk, and under uncertainty.

Expert Solution

Decision making under certainty; the decision under certainty exists when the decision-maker knows with logical certainty what the alternatives are, what conditions are associated with every alternative, and the consequence of each alternative. Under conditions of certainty the following are available, 1) reliable 2 information, 3) measurable, and 4) accuracy .

Decision making under risk;. Under a condition of risk, the decision maker has insufficient information about available alternatives nevertheless; it has a good idea of the probability of outcomes for every alternative.

Decision making under uncertainty; State of uncertainty exists when we cannot predict the future environment and everything is in a state of variability. The decision-maker does not have information of all available alternatives, the risks associated with every alternative, and the probability of each alternative or their consequences.

keosha answered 1 year ago

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