Readings on the Principles and Applications of Decision Analysis: Volume 2: Professional Collection

'This is the original guide for anyone who actually wants to practice decision analysis and not just think about it, teach it, and/or write research papers about it.' 'Since the term "Decision Analysis" was coined in 1963 (see paper #4), its theory and practice have developed profusely. Stanford University has been a center for the intellectual development of decision analysis and the catalyst for its extensive application. Consultants associated with Stanford, many of them graduates of the Engineering-Economic Systems Department, have accumulated hundreds of man-years of experience. This collection is intended to portray the "Stanford School of Decision Analysis," as viewed by the editors. Because the Stanford decision analysis community has the broadest base of practical experience, we believe these papers represent the most successful methods of dealing with decision problems. We have not attempted to represent alternative approaches or to enter into any debate of their relative merits. We have, however, included a few papers from other fields, notably psychology, that have had, and are having, a significant impact on the practice of decision analysis. In these two volumes, we have collected papers on both the theory and application of decision analysis. Although most of these readings have been published elsewhere, we have added a few unpublished papers to represent recent developments. The first volume is designed to be accessible to a general readership and contains introductory papers and descriptions of actual applications. Applications to corporate strategic decisions are necessarily disguised and underrepresented because of their proprietary nature. The second volume is designed for the professional student of decision analysis. In addition to containing professional and technical papers, it contains some papers discussing recent developments in methodology for approaching health and safety problems. While papers in this volume use technical terminology, many of their ideas will be understandable to anyone. ABOUT SDG *Strategic Decisions Group (SDG)* specializes in helping capital-intensive, risk-intensive, and research-intensive companies analyze their most critical decisions, develop strategies, and create business opportunities. Formed in 1981 and located in Menlo Park, SDG comprises a staff of consultants who have been pioneers in strategy development and decision analysis for more than fifteen years. The SDG combination of broad business experience, specific industry knowledge, and technical expertise in decision analysis has proven outstandingly effective to clients in developing strategies, creating business innovations, allocating resources, managing risk, and selecting business portfolios. SDG consultants work in joint teams with clients to transfer knowledge and to build the strong client commitment necessary for successful implementation. By blending this participative consulting style with an ongoing professional development program, SDG enriches its clients own corporate capabilities. _Readings on the Principles and Applications of Decision Analysis_ is a product of SDG's continued dedication to advancing the principles of good decision making. ABOUT THE EDITORS *Dr. Ronald A. Howard*, Professor of Engineering-Economic Systems in the School of Engineering of Stanford University since 1965, directs teaching and research in the Decision Analysis Program, and is the Director of the Decision and Ethics Center. Dr. Howard defined the profession of decision analysis in 1964 and has since supervised several doctoral theses in decision analysis every year. His experience includes dozens of decision analysis projects in virtually all fields of application, from investment planning to research strategy, and from hurricane seeding to nuclear waste isolation. He has been a consultant to several companies and is presently a founder and director of Strategic Decisions Group. He has published three books, written dozens of technical papers, and provided editorial service to seven technical journals. He has lectured on decision analysis at universities in several foreign countries, including the Soviet Union and the People’s Republic of China. His current research interests are life-and-death decision making and the creation of a coercion-free society. *Dr. James E. Matheson*, a founder and director of Strategic Decisions Group and a leading figure in developing professional decision analysis, has supervised hundreds of decision analysis applications in such areas as corporate strategy, capital investment, research and development, environmental safety, contract bidding, space exploration, and public investment. He created the SRI International Decision Analysis Group and directed it for fourteen years. He is responsible for innovations in methodology that have made decision analysis a powerful tool throughout many fields and industries. In 1967, Dr. Matheson was appointed to the consulting faculty of Stanford University where he is currently Consulting Professor of Engineering-Economic Systems. He continues to help businesses develop their own decision analysis capabilities through SDG’s extensive executive and professional development program. His current research interests are managing risk in business portfolios and integrating research and development decisions into business strategy.