Improving an optimization‐based framework for sensitivity analysis in multi‐criteria decision‐making

The framework for sensitivity analysis in discrete multi‐criteria decision analysis developed by Rios Insua and French allows simultaneous variation of all parameters and applies to many paradigms for decision analysis. However, its computational load may inhibit use, particularly in the context of a decision conference where results are required in near real time. In order to improve on the current algorithm and its implementation, we investigate, on the one hand, an opportunistic approach aimed at reducing the number of optimization problems solved in the original framework and, on the other, an alternative framework based on distance analysis. Computational results on linear and bilinear models are reported. Copyright © 2001 John Wiley & Sons, Ltd.     

An evaluation of multi‐criteria methods in integrated assessment of climate policy

Those who conduct integrated assessments (IAs) are aware of the need to explicitly consider multiple criteria and uncertainties when evaluating policies for preventing global warming. MCDM methods are potentially useful for understanding tradeoffs and evaluating risks associated with climate policy alternatives. A difficulty facing potential MCDM users is the wide range of different techniques that have been proposed, each with distinct advantages. Methods differ in terms of validity, ease of use, and appropriateness to the problem. Alternative methods also can yield strikingly different rankings of alternatives. A workshop was held in which climate change experts and policy makers evaluated the usefulness of MCDM for IA. Participants applied several methods in the context of a hypothetical greenhouse gas policy decision. Methods compared include value and utility functions, goal programming, ELECTRE, fuzzy sets, stochastic dominance, min max regret, and several weight selection methods. Ranges, rather than point estimates, were provided for some questions to incorporate imprecision regarding weights. Additionally, several visualization methods for both deterministic and uncertain cases were used and evaluated. Analysis of method results and participant feedback through questionnaires and discussion provide the basis for conclusions regarding the use of MCDM methods for climate change policy and IA analyses. Hypotheses are examined concerning predictive and convergent validity of methods, existence of splitting bias among experts, perceived ability of methods to aid decision‐making, and whether expressing imprecision can change ranking results. Because participants gained from viewing a problem from several perspectives and results from different methods often significantly differed, it appears worthwhile to apply several MCDM methods to increase user confidence and insight. The participants themselves recommended such multimethod approaches for policymaking. Yet they preferred the freedom of unaided decision‐making most of all, challenging the MCDM community to create transparent methods that permit maximum user control. Copyright © 2002 John Wiley & Sons, Ltd.     

Analog scale,magnitude estimation,and person trade‐off as measures of health utility: biases and their correction

Subjects judged the disutility of health conditions (e.g. blindness) using one of them (e.g. blindness+deafness) as a standard, using three elicitation methods: analog scale (AS, how bad is blindness compared to blindness+deafness?); magnitude estimation (ME, blindness+deafness is how many times as bad as blindness?); and person trade‐off (PTO, how many people cured of blindness is as good as 10 people cured of blindness+deafness?). ME disutilities of the less bad condition were smallest, and AS was highest. Interleaving PTO with ME made PTO more like ME. AS disutilities were inconsistent with direct judgments of differences between pairs of conditions. ME and PTO judgments were internally inconsistent: e.g. the disutility of one‐eye‐blindness relative to blindness+deafness was larger than predicted from comparison of each to blindness. Consistency training reduced inconsistency, increased agreement between AS and PTO, and transferred from one method to the other. The results support the use of consistency checks in utility elicitation. Copyright © 2001 John Wiley & Sons, Ltd.     

Investigating the roots of the favourite–longshot bias: an analysis of decision making by supply‐ and demand‐side agents in parallel betting markets

This paper offers new insights into the behavioural origins of the ‘favourite–longshot’ bias — an established feature of betting markets, whereby longshots win less often than the subjective probabilities imply and favourites more often. A number of alternative explanations has been offered for this phenomenon but the main debate focuses on whether it is caused by the behaviour of those supplying betting markets (bookmakers) or of the demand‐side agents in these markets (bettors) . This study analyses a new data source which offers detailed information for a large sample of recent UK horseraces on decision‐making behaviour within the parimutuel and the parallel bookmaker‐based betting markets. The results offer strong evidence for the existence of the ‘favourite–longshot’ bias in bookmaker‐based markets, with a corresponding absence of such an effect in the parimutuel case. These results offer support for the view that the origins of the ‘favourite–longshot’ bias lie principally in the decisions of bookmakers rather than in the decisions of bettors. Copyright © 2000 John Wiley & Sons, Ltd.     

How do investors make predictions? Insights from analogical reasoning research

Previous work on investor decision making has focused almost exclusively on information specific to the company being judged. Consequently, every decision is viewed as a novel event, disconnected from the investor's existing knowledge. In this study, the analogical reasoning literature provides the theoretical support for arguing that investors frequently utilize existing knowledge as a basis for generating predictions about a company's future. The specific proposal is that investors transfer their existing knowledge via two different forms of analogical reasoning. The first, relational reasoning, is based primarily on structural correspondence between a novel company and an existing schema. The second, literal similarity reasoning, is based primarily on surface correspondence of a novel company and a previously encountered company. Our theoretical framework is tested in a study in which experienced investors predict the outcome of a novel company's strategy after reading about the experiences of other companies who implemented a similar strategy. The results are consistent with the occurrence of both relational and literal similarity reasoning, with relational reasoning emerging as the dominant approach to generating investors' predictions. Copyright © 2000 John Wiley & Sons, Ltd.     

Cognitive adaptation and its consequences: a test of cognitive continuum theory

Cognitive Continuum Theory (CCT) is an adaptive theory of human judgement and posits a continuum of cognitive modes anchored by intuition and analysis. The theory specifies surface and depth task characteristics that are likely to induce cognitive modes at different points along the cognitive continuum. The current study manipulated both the surface (information representation) and depth (task structure) characteristics of a multiple‐cue integration threat assessment task. The surface manipulation influenced cognitive mode in the predicted direction with an iconic information display inducing a more intuitive mode than a numeric information display. The depth manipulation influenced cognitive mode in a pattern not predicted by CCT. Results indicate this difference was due to a combination of task complexity and participant satisfacing. As predicted, analysis produced a more leptokurtic error distribution than intuition. Task achievement was a function of the extent to which participants demonstrated an analytic cognitive mode index, and not a function of correspondence, as predicted. This difference was likely due to the quantitative nature of the task manipulations. Copyright © 2000 John Wiley & Sons, Ltd.     

Choices and opportunities: another effect of framing on decisions

Many decisions can be framed either as ‘choices’ between alternative courses of action (e.g. Should I move to New York or stay in Chicago?) or as ‘opportunities’ to pursue a particular course of action (i.e. Should I move to New York?). Although there is no logical difference between these two different decision frames, there may be important psychological differences between them. In four studies, we explore the differences between ‘choices’ and ‘opportunities’. The results of Studies 1 and 2 show that college students view many of the decisions they typically face as opportunities, rather than choices. Further, the results of Study 2 suggest that the frame students adopt is systematically related to the preferences they express. The latter finding led to Studies 3 and 4, where we show that preferences can be influenced by encouraging people to adopt one decision frame rather than another. © 1998 John Wiley & Sons, Ltd.     

Determining the implementation order of a general plan by using a multicriteria method

We describe a real-life application of a new multicriteria method in the context of assisting the decision-making for a general plan in the municipality of Kirkkonummi in Uusimaa, Finland. At the time our group started working on the problem, a proposal for an overall plan had already been completed, but the order in which different regional parts of the plan should be implemented needed to be considered based on the environmental impact assessment (EIA) procedure. The EIA procedure generated a large amount of data about the different impacts of the alternatives. For this group decision making problem we developed the SMAA-3 decision support method which does not require any explicit preference information from the decision makers during the procedure. The uncertainty of the basic data is modelled using ELECTRE III-type pseudo-criteria with preference and indifference thresholds. © 1998 John Wiley & Sons, Ltd.     

The modified star graph and the petal diagram: two new visual aids for discrete alternative multicriteria decision making

Many studies have looked into the provisions of visual aids to multicriteria decision making. However, most of them have separated the display of alternative profiles and criteria weight information into two displays. This makes the analysis of the relationship between the criteria and alternatives and the effect of changing the criteria weights on the decision difficult. In this study, displays that can incorporate the display of both alternative profiles and criteria weight information for discrete alternative multicriteria decision-making problems are examined. The simple additive model is the multicriteria analysis method used. The result is two new visual aids for representing data of multicriteria decision-making problems, the modified star graph and the petal diagram. This paper discusses the two displays and compares their strengths and weaknesses. The results of a preliminary test conducted to evaluate the effectiveness of the displays are also included. © 1998 John Wiley & Sons, Ltd.