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The Use and Value of Models in Decision Analysis

Author

Listed:
  • Robert C. Nickerson

    (San Francisco State University, San Francisco, California)

  • Dean W. Boyd

    (Decision Focus Incorporated, Palo Alto, California)

Abstract

A normative approach to the use of models is presented in which modeling is viewed as a source of information. The value of modeling can then be interpreted from the value of information perspective. The expected value of modeling is defined as the increase in the expected value of the outcome that results from the use of the model-supplied information. With this definition the value of modeling is characterized under a variety of conditions. From a practical point of view the most useful result is that, under certain conditions, the expected value of modeling is maximum when the prior expectations of the value of the outcome for each alternative are equal.

Suggested Citation

  • Robert C. Nickerson & Dean W. Boyd, 1980. "The Use and Value of Models in Decision Analysis," Operations Research, INFORMS, vol. 28(1), pages 139-155, February.
    • Handle: RePEc:inm:oropre:v:28:y:1980:i:1:p:139-155
    DOI: 10.1287/opre.28.1.139
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    Cited by:

    1. Tseng, Chiu-Che & Gmytrasiewicz, Piotr J., 2006. "Real-time decision support and information gathering system for financial domain," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 363(2), pages 417-436.
    2. Robert T. Clemen & Robert C. Kwit, 2001. "The Value of Decision Analysis at Eastman Kodak Company, 1990-1999," Interfaces, INFORMS, vol. 31(5), pages 74-92, October.
    3. Omar Besbes & Robert Phillips & Assaf Zeevi, 2010. "Testing the Validity of a Demand Model: An Operations Perspective," Manufacturing & Service Operations Management, INFORMS, vol. 12(1), pages 162-183, June.
    4. den Boer, Arnoud V. & Sierag, Dirk D., 2021. "Decision-based model selection," European Journal of Operational Research, Elsevier, vol. 290(2), pages 671-686.
    5. James E. Smith & Robert L. Winkler, 2006. "The Optimizer's Curse: Skepticism and Postdecision Surprise in Decision Analysis," Management Science, INFORMS, vol. 52(3), pages 311-322, March.

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