Decision Making under Uncertainty

Uncertainty plays a very important role in making sound decisions. This chapter provides a basic overview of those elements of decision analysis that are important in the context of the subsurface. It illustrates some basic concepts in decision making with an example of the thumbtack game. The chapter also illustrates the challenges with two very different situations that would be rather typical for the decision-making background. The first situation is a decision analyst visiting ExxonMobil in Houston and the second situation concerns the Danish government. Decision analysis guides the decision maker to turn opaque situations into a clear set of actions based on beliefs and preferences. As with any science, decision analysis operates with definitions and nomenclature. Decision trees are graphical models that organize logically, in time, the various decisions, alternatives, uncertainties, and payoffs. Decision analysis and VOI has been widely applied to decisions involving engineering designs and tests.