Decision Analysis: An OverviewRalph L. KeeneyOperations Research, Vol. 30, No. 5. (Sep. - Oct., 1982), pp. 803-838.Stable URL:http://links.jstor.org/sici?sici=0030-364X%28198209%2F10%2930%3A5%3C803%3ADAAO%3E2.0.CO%3B2-YOperations Research is currently published by INFORMS.Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available athttp://www.jstor.org/about/terms.html. JSTOR's Terms and Conditions of Use provides, in part, that unless you have obtainedprior permission, you may not download an entire issue of a journal or multiple copies of articles, and you may use content inthe JSTOR archive only for your personal, non-commercial use.Please contact the publisher regarding any further use of this work. Publisher contact information may be obtained athttp://www.jstor.org/journals/informs.html.Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printedpage of such transmission.The JSTOR Archive is a trusted digital repository providing for long-term preservation and access to leading academicjournals and scholarly literature from around the world. The Archive is supported by libraries, scholarly societies, publishers,and foundations. It is an initiative of JSTOR, a not-for-profit organization with a mission to help the scholarly community takeadvantage of advances in technology. For more information regarding JSTOR, please contact [email protected]://www.jstor.orgSat Jan 12 16:09:31 2008Feature Article Decision Analysis: An Overview RALPH L. KEENEY Woodward-Clyde Consultants, San Francisco, California (Received February 1981; accepted June 1982) This article, written for the nondecision analyst, describes what decision analysis is, what it can and cannot do, why one should care to do this, and how one does it. To accomplish these purposes, it is necessary first to describe the decision environment. The article also presents an overview of decision analysis and provides additional sources for its foundations, proce- dures, history, and applications. 1. THE DECISION ENVIRONMENT THE ENVIRONMENT in which decisions must be made is more complex than ever before. Governmental regulations, such as the National Environmental Policy Act and the Occupational Safety and Health Act, require corporations and governmental agencies to consider and justify the impact of their actions. Informed consumers, employees, and shareholders demand greater public consciousness, responsibility, and accountability from corporate and governmental decision makers. For example, executives evaluating potential mergers or acquisitions must consider antitrust suits and other legal matters, social impact, and political issues in addition to financial aspects. In appraising potential public programs or the elimination of existing programs, a governmental agency should consider not only the multifaceted costs and benefits of its options but also the diversity of the population and its sometimes conflicting viewpoints and political concerns. Such examples suggest several factors contributing to the complexity of decision problems. Because the purpose of analysis is to illuminate complexity and provide insight, it is worthwhile to summarize these intertwined features. 1. Multiple objectives. It is desirable to achieve several objectives at once. In evaluating routes for proposed pipelines, one wishes si- multaneously to minimize environmental impact, minimize health and safety hazards, maximize economic benefits, maximize positive social impact, and please all groups of interested citizens. Because Subject classificatron: 91 overview, 607 decision analysis, 855 survey 803 Operations Research 0030-364X/82/3005-0803 $01.25 Vol.30, No. 5, September-October 1982 O 1982 Operations Research Society of America804 Keeney all this cannot be done with a single alternative, it is important to appraise the degree to which each objective is achieved by the competing alternatives. 2. Difficulty of identifying good alternatiues. Because many factors affect the desirability of an alternative, the generation of good alternatives for careful analysis involves substantial creativity. In some problems, a good deal of soul-searching is required to identify even a single alternative which seems possible, let alone reasonable, for achieving the problem objectives. 3. Intangibles. How should one assess goodwill of a client, morale of a work force, distress at increasing bureaucracy and governmental regulations, or the aesthetic disruption of a telecommunications tower? Although it is difficult to measure such intangibles, they are often critical factors in a decision. 4. Long-time horizons. The consequences of many decisions are not all felt immediately, but often cover (by intention or otherwise) a long time period. For example, the projected lifetime for most major facilities is 25-100 years and research and development projects routinely require 5-20 years. Future implications of alter- natives now being considered should be accounted for in the decision-making process. 5. Many impacted groups. Major decisions, such as constructing canals for crop irrigation or legislation regarding abortions, often affect groups of people whose attitudes and values differ greatly. Because of these differences, concern for equity contributes to the complexity of a problem. 6. Risk and uncertainty. With essentially all problems, it is not possible to predict precisely the consequences of each alternative. Each involves risks and uncertainties-an advertising campaign may fail, a large reservoir may break, a government reorganization may result in an unwieldy bureaucracy, or a new product could turn out to be an Edsel. The major reasons for the existence and persistence of these uncertainties include: (1)little or no data can be gathered for some events, (2) some data are very expensive or time-consuming to obtain, (3)natural phenomena such as earth- quakes and droughts affect impact, (4) population shifts affect future impact, (5) priorities, and hence perceived effects, change over time, and (6) actions of other influential parties, such as government or competitors, are uncertain. 7. Risks to life and limb. A general class of critical uncertainties concerns the risks