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What Makes Some Decisions Complex

What Makes Some Decisions Complex

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Published by: curlicue on Dec 18, 2008
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06/17/2009

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What makes somedecisions complex?
 
by Prof. Peter McBurney - p.j.mcburney [at]csc.liv.ac.uk 
 Most real-world business decisions areconsiderably more complex than theexample decisions discussed by academicsin decision theory and game theory. Whatmakes some decisions more complex thanothers? Here I list some features, not all of which are present in all decision situations.
 The problems are not posed ina form amenable to classicaldecision theory.Decision theory requires thedecision-maker to know whatare his or her action-options,what are the consequences of these, what are the uncertainevents which may influencethese consequences, and whatare the probabilities of theseuncertain events (and to knowall these matters in advance of the decision). Yet, for many
 
real-world decisions, thisknowledge is either absent, ormay only be known in somevague, intuitive, way. The drugthalidomide, for example, wastested thoroughly before it wassold commercially -- on maleand female human subjects,adults and children. The onlygroup not to be tested werepregnant women, which were,unfortunately, the main groupfor which the drug had seriousside effects. These side effectswere consequences which hadnot been imagined before thedecision to launch was made.Decision theory does not tell ushow to identify the possibleconsequences of somedecision, so what use is it inreal decisions?
 There are fundamental domainuncertainties.None of us know the future.Even with considerableinvestment in market research,future demand for newproducts may not be known
because potential customersthemselves do not know with
 
any certainty what their futuredemand will be.
Moreover, inmany cases, we don't know thepast either. I have had manyexperiences where participantsin a business venture havedisagreed profoundly about thecauses of failure, or success,and so have taken verydifferent lessons from theexperience.
Decisions may be unique (non-repeated).It is hard to draw on pastexperience when something isbeing done for the first time. This does not stop peopletrying, and so decision-makingby metaphor or by anecdote isan important feature of real-world decision-making, mostlyignored by decision theorists.
 There may be multiplestakeholders and participantsto the decision.In developing a business planfor a global satellite network,for example, a decision-makerwould need to take account of 

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