Decision Theory
Decision theory is an interdisciplinary field that deals with the logic and methodology of making choices, particularly under conditions of uncertainty. It is a branch of applied probability theory and analytic philosophy that involves assigning probabilities to various factors and numerical consequences to outcomes. The theory is concerned with identifying optimal decisions, where optimality is defined in terms of the goals and preferences of the decision-maker.
Areas of application
- Business
- Economics
- Finance
- Healthcare
- Political Science
- Sociology
Example
For instance, a company may use decision theory to determine the best course of action for investing in a new product line. By analyzing the potential outcomes and probabilities of each outcome, the company can make an informed decision that maximizes their chances of success.