Lecture 03 Elements of a Decision Problem

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Engineering Lab @ Purdue (DELP) School of Mechanical Engineering Purdue

1 Lecture 03 Elements of a Decision Problem Jitesh H. Panchal ME 597: Decision Making for Engineering Systems Design Design Engineering Purdue (DELP) School of Mechanical Engineering Purdue University, West Lafayette, IN September 2, 2014 c Jitesh H. Panchal Lecture 03 1 / 25

2 Lecture Outline 1 The Decision Basis Decision Basis and Structure Objectives, Attributes, and Goals 2 Hierarchical Nature of Objectives Fundamental vs. Means Objectives Desirable Properties of Sets of Objectives Attributes 3 Influence Diagrams Decision Trees c Jitesh H. Panchal Lecture 03 2 / 25

3 Decision Basis and Structure Objectives, Attributes, and Goals The Structure of a Design Decision p 11 O 11 U(O 11 ) A 1 O 12 U(O 12 ) p 1k O 1k U(O 1k ) p 21 O 21 U(O 21 ) Decision A 2 O 22 U(O 22 ) Select A i p 1k O 2k U(O 2k ) p n1 O n1 U(O n1 ) A n O n2 U(O n2 ) p nk O nk U(O nk ) Alternatives Outcomes Preferences Choice Slide courtesy: Chris Paredis c Jitesh H. Panchal Lecture 03 3 / 25

4 Decision Basis and Structure Objectives, Attributes, and Goals Alternative-Focused vs. Value Focused Decision Making Limitations of alternative-focused approaches: 1 Simply choosing readily available alternatives 2 No attention on the interaction between values and the creation of alternatives 3 All effort reserved for partial evaluation of given alternatives 4 Criteria do not reflect fundamental objectives, but rather proxies 5 Achievement of different objectives is not systematically integrated c Jitesh H. Panchal Lecture 03 4 / 25

5 Decision Basis and Structure Objectives, Attributes, and Goals The Decision Basis: A Formal Representation of the Problem DECISION BASIS Choice Alternatives P R O B L E M Synthesis - Elicitation Information Models Probability Assignments Preferences Analysis Logical Evaluation D E C I S I O N Value Time & Risk Preferences Howard, R. A., Decision Analysis: Practice and Promise, Management Science, Vol. 34, No. 6 (Jun., 1988), pp c Jitesh H. Panchal Lecture 03 5 / 25

6 Decision Basis and Structure Objectives, Attributes, and Goals Steps in Modeling a Design Decision 1 Identify the decision situation 2 Determine the objectives 3 Choose the attributes 4 Identify design alternatives and design variables 5 Model the decision structure with an influence diagram or a decision tree c Jitesh H. Panchal Lecture 03 6 / 25

7 Decision Basis and Structure Objectives, Attributes, and Goals Terminology Objective: An objective is a specific thing that you want to achieve. An objective indicates the direction in which we should do better, e.g., minimize weight. Values: An individual s objectives taken together make up his/her values. Values of the decision makers are made explicit with objectives. Goal: A goal is different from an objective in that it is either achieved or not. Goals are useful for clearly identifying a level of achievement to strive toward, e.g., weight should be less than 100 kg. Attribute: provides a scale for measuring the degree to which its respective objective is met. After identifying attributes, we need preferences towards them, and uncertainty in achieving them. (Focus of future lectures) c Jitesh H. Panchal Lecture 03 7 / 25

8 Fundamental vs. Means Objectives Fundamental vs. Means Objectives Desirable Properties of Sets of Objectives Attributes Fundamental objectives Represent the reasons why the decision maker cares about the decision, and, more importantly, how the available alternatives should be evaluated. Can be decomposed hierarchically into a tree There should be no overlap between different branches of the tree Means objectives Help to achieve fundamental objectives (be careful! often dependent on system alternative) Important only because of its implications for some other objective Organized into a network of objectives c Jitesh H. Panchal Lecture 03 8 / 25

9 Fundamental Objectives Hierarchy: Example Fundamental vs. Means Objectives Desirable Properties of Sets of Objectives Attributes Maximize Safety Minimize Loss of Life Minimize Serious Injuries Minimize Minor Injuries Adults Children Adults Children c Jitesh H. Panchal Lecture 03 9 / 25

10 Fundamental vs. Means Objectives Desirable Properties of Sets of Objectives Attributes Determining Whether An Objective is Fundamental or Means Separate means and fundamental objectives by asking Why is that Important? (WITI) Objective: Minimize the distance the material is transported by trucks Why is that important? Because shorter distances would reduce the chances of accident. However it may turn out that shorter transportation routes go through major cities, exposing more people to the hazardous material, and this may be undesirable. This points to objectives related to traffic accidents, costs, and exposure. Why is that important? Accidents: with fewer accidents, there may be fewer highway fatalities and less accidental exposure of the public to the hazardous material. Why is it important to maximize exposure? Because we want to minimize the health impacts of the hazardous material Why is it important to minimize health impacts? It is simply important... Fundamental objective! Keeney, R.L., Creativity in Decision Making with Value-Focused Thinking, Sloan Management Review, Vol. 35, No. 4, pp , Summer c Jitesh H. Panchal Lecture / 25

11 Why Structure Objectives in a Hierarchy? Fundamental vs. Means Objectives Desirable Properties of Sets of Objectives Attributes 1 Higher levels of objectives can be identified relatively easily. 2 Higher level objectives provide a basis for specifying lower-level objectives. 3 Hierarchy helps in identifying missing objectives. 4 It is easier to identify attributes to measure the achievement of lower level objectives than that of higher level objectives. 5 The attributes for lower-level objectives collectively indicate the degree to which the associated higher-level objective is achieved. 6 The complete set of lower-level attributes for a fundamental objectives hierarchy provides a basis for describing the consequences in the decision problem and for assessing an objective function appropriate for the problem. Keeney, R.L., Value-Focused Thinking: A Path to Creative Decision-Making, Harvard University Press, c Jitesh H. Panchal Lecture / 25

12 Another Example of an Objectives Hierarchy Fundamental vs. Means Objectives Desirable Properties of Sets of Objectives Attributes Evaluating passenger transport facilities Figure 2.2, Page 42 (Keeney and Raiffa, 2003) c Jitesh H. Panchal Lecture / 25

13 Fundamental vs. Means Objectives Desirable Properties of Sets of Objectives Attributes Desirable Properties of Fundamental Objectives 1 Essential, to indicate consequences in terms of fundamental reasons for interest in the decision situation. 2 Controllable, to address consequences that are influenced only by the choice of alternatives in the decision context. 3 Complete, to include all fundamental aspects of the consequences of the decision alternatives. 4 Measurable, to define the objectives precisely and to specify the degrees to which objectives may be achieved. Keeney, R.L., Value-Focused Thinking: A Path to Creative Decision-Making, Harvard University Press, c Jitesh H. Panchal Lecture / 25

14 Fundamental vs. Means Objectives Desirable Properties of Sets of Objectives Attributes Desirable Properties of Fundamental Objectives (contd.) 5 Operational, to render the collection of information required for an analysis reasonable considering the time and effort available. 6 Decomposable, to allow the separate treatment of different objectives in the analysis. 7 Non-redundant, to avoid double-counting of possible consequences. 8 Concise, to reduce the number of objectives needed for the analysis of a decision 9 Understandable, to facilitate generation and communication of insights for guiding the decisionmaking process. Keeney, R.L., Value-Focused Thinking: A Path to Creative Decision-Making, Harvard University Press, c Jitesh H. Panchal Lecture / 25

15 Means Objective Network: Example Fundamental vs. Means Objectives Desirable Properties of Sets of Objectives Attributes Means Objectives help to achieve fundamental objectives. Maximize Safety Maximize use of vehicle-safety features Minimize accidents Motivate purchase of safety features on vehicles Maintain vehicles properly Maximize driving quality Require safety features Educate public about safety Enforce traffic laws Have reasonable traffic laws Minimize driving under influence of alcohol c Jitesh H. Panchal Lecture / 25

16 Fundamental vs. Means Objectives Desirable Properties of Sets of Objectives Attributes How to construct mean-objective networks and fundamental-objectives hierarchies? 1 Fundamental Objectives To move downward in the hierarchy: What do you mean by that? To move upward in the hierarchy: Of what more general objective is this an aspect? 2 Means Objectives To move away from fundamental objectives: How could you achieve this? To move toward fundamental objectives: How is that important? (WITI) c Jitesh H. Panchal Lecture / 25

17 Relating Fundamental and Means Objectives Fundamental vs. Means Objectives Desirable Properties of Sets of Objectives Attributes Summer intern decision Figure 3.4 on page 48 (Clemen, 1997) c Jitesh H. Panchal Lecture / 25

18 Nature of Attributes The Decision Basis Fundamental vs. Means Objectives Desirable Properties of Sets of Objectives Attributes Attributes provide a scale for measuring the degree to which its respective objective is met. Attributes should be 1 Comprehensive: knowing the level of an attribute, we get a clear understanding of the extent that the objective is achieved. 2 Measurable: we can either assign a point value, or obtain a probability distribution (for each alternative) over the possible levels of the attribute. AND we can assess the decision maker s preferences for the different levels of the attribute. 3 Relevant, and not subject to other extraneous considerations. c Jitesh H. Panchal Lecture / 25

19 Influence Diagrams Decision Trees Structuring the Decision Elements Influence diagrams and decision trees provide two approaches for structuring the decision elements: 1 Decisions and Alternatives 2 Uncertain Events 3 Objectives DECISION BASIS Choice Alternatives P R O B L E M Synthesis - Elicitation Information Models Probability Assignments Preferences Analysis Logical Evaluation D E C I S I O N Value Time & Risk Preferences c Jitesh H. Panchal Lecture / 25

20 Influence Diagrams Decision Trees Influence Diagrams Influence diagrams capture the decision maker s state of knowledge about the situation. Rectangles represent decisions (decision nodes) Ovals represent chance events (chance nodes) Rectangle with rounded corners represent consequences mathematical calculation or a constant value (consequence or calculation nodes) Arcs represent predecessor and successor relationships Chance Venture Succeeds or fails Invest? Decision Return on Investment Consequence Figure 3.5 on page 51 (Clemens, 1997) c Jitesh H. Panchal Lecture / 25

21 Influence Diagrams Decision Trees Influence Diagrams and Fundamental Objectives Hierarchy Objectives Hierarchy Maximize overall satisfaction Invest in computer industry Return on investment Influence Diagram Invest? Venture Succeeds or fails Return on Investment Computer Industry Growth Overall Satisfaction Figure 3.6 on page 52 (Clemens, 1997) c Jitesh H. Panchal Lecture / 25

22 Influence Diagrams Decision Trees Decision Trees 1 Squares represent decisions to be made 2 Circles represent chance events 3 Ends of branches represent consequences Invest Venture succeeds Venture fails Large return on investment Funds lost Do not invest Typical return earned on less risky investment Figure 3.21 on page 68 (Clemens, 1997) c Jitesh H. Panchal Lecture / 25

23 Influence Diagrams Decision Trees Decision Trees and Objectives Hierarchy Best System Concept Selection System 1 System 2 Detection Effectiveness Time to implement Passenger Acceptance Cost System 3 System 4 Figure 3.22 on page 69 (Clemens, 1997) c Jitesh H. Panchal Lecture / 25

24 Influence Diagrams Decision Trees Comparison: Decision Trees vs. Influence Diagrams Decision trees display considerably more information than influence diagrams. Decision trees get messy faster. Influence diagrams are valuable for the structuring phase of problem solving, and for representing large problems. Decision trees display the details of a problem. c Jitesh H. Panchal Lecture / 25

25 Influence Diagrams Decision Trees References 1 Keeney, R.L., Raiffa, H., Decisions with Multiple Objectives - Preferences and Value Tradeoffs, Cambridge University Press, Clemen R.T., Making Hard Decision: An Introduction to Decision Analysis, Duxbury Press, Howard, R. A., Decision Analysis: Practice and Promise, Management Science, Vol. 34, No. 6 (Jun., 1988), pp Keeney, R.L., Value-Focused Thinking: A Path to Creative Decision-Making, Harvard University Press, Keeney, R.L., Creativity in Decision Making with Value-Focused Thinking, Sloan Management Review, Vol. 35, No. 4, pp , Summer c Jitesh H. Panchal Lecture / 25

26 THANK YOU! c Jitesh H. Panchal Lecture 03 1 / 1

Chapter 3 Structuring Decisions

Making Hard Decisions Chapter 3 Structuring Decisions Slide 1 of 49 Introduction Suppose elements of Decision Problem (DP) are available, i.e.: Objectives that apply to the decision context Immediate decision