Risk, uncertainty, and decision analysis

This chapter is devoted to the introduction of the decision analysis framework approach to problem solving. The concept of decision analysis and procedures associated with decision making under certainty, risk, or uncertainty and sequential decisions are introduced. The analysis is further extended to show how decision trees can be used to analyze a decision under uncertainty. The notions of expected value of perfect information and imperfect information are presented in order to assist the decision maker in developing an optimal decision strategy. This applies to many oil engineering operations. The systematic use of information to determine how often specified events may occur and the magnitude of their likely consequences is detailed as well.