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Exceptional Paper--Probability Encoding in Decision Analysis

Author

Listed:
  • Carl S. Spetzler

    (Stanford Research Institute)

  • Carl-Axel S. Staël Von Holstein

    (Stanford Research Institute)

Abstract

This paper presents the present philosophy and practice used in probability encoding by the Decision Analysis Group at Stanford Research Institute. Probability encoding, the process of extracting and quantifying individual judgment about uncertain quantities, is one of the major functions required in the performance of decision analysis. The paper discusses the setting of the encoding process, including the use of sensitivity analyses to identify crucial state variables for which extensive encoding procedures are appropriate. The importance of balancing modeling and encoding techniques is emphasized and examples of biases and unconscious modes of judgment are reviewed. A variety of encoding methods are presented and their applicability is discussed. The authors recommend and describe a structured interview process that utilizes a trained interviewer and a number of techniques designed to reduce biases and aid in the quantification of judgment.

Suggested Citation

  • Carl S. Spetzler & Carl-Axel S. Staël Von Holstein, 1975. "Exceptional Paper--Probability Encoding in Decision Analysis," Management Science, INFORMS, vol. 22(3), pages 340-358, November.
  • Handle: RePEc:inm:ormnsc:v:22:y:1975:i:3:p:340-358
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    File URL: http://dx.doi.org/10.1287/mnsc.22.3.340
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