Discuss the differences between “decision making under uncertainty”; “decision making under risk”; “decision making under certainty”; with relevance to operations research decision tables and trees.

Decisions are integral practices of our everyday life.  Almost in every scenario, one is required to make a choice between two or more alternatives. The process of resting on one of the numerous options is referred to as the decision-making process. Managers occupy a very crucial role within the organization. In their positions, managers make all types of action on behalf of the entity. In business, the decision can yield positive or negative impact on performance. Hence, it is important for the individual making the decisions to comprehend the decision-making and application of the various decision-making tools available.  One of the peculiar concepts in decision theory is the state of nature. The state of nature describes a situation that is out of control for the decision maker (Quantitative Modules Decision Making Tools 674). Another common concept in decision making is decision theory. In regard to being more of a body of knowledge than a concept, decision theory entails analytic techniques employed by decision makers during times of uncertainty, risk and certainty.

The Decision-Making Environment

Decision theory describes three environments under which business decisions are made; uncertainty, risk and certainty decision making situations. Each of the three categories bears unique features that define the process, as well as tools used in making decisions. Only a few conditions or occurrences are certain in life. Hence, the environment of certain decision making is usually rare. Decision making in the environment of uncertainty is filled with factors that are out of control of the decision maker. In a business case management, uncertainty is normally associated with the lack of sufficient knowledge or information about the factors at play (Geweke 123). Making decisions under uncertainty is common in business environments. Decision making under an environment of risk portrays the concept of probability at play (Jenhani, Amor and Elouedi 1). The states of nature are perceived to be probabilities, hence, summing up to 1. Developing deep knowledge of the three states of nature is beneficial to decision makers to determine the relevant decision-making tools when the need arises (Koontz and Weihrich 98). The paper entails a discussion and application of the broad range of instruments under the three scenarios that require decision making.

Decision Making Under Environment of Uncertainty

In case there exists total uncertainty, state of nature reigns in the decision-making process, the following decision criteria are sought.

Maximax

This criterion finds alternatives that maximize the maximum result of decision alternatives. The criterion is characterized by optimism. This approach is common with traders or managers who seek to attain the maximum returns following a successful process of decision making (Ykhlef 11). The decision maker first locates the max number in all the payoffs…..

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