**SYST 473 / 573 / OR 681 :
Decision and Risk Analysis**

Spring 2003

Thursday,

Texts and Reading Materials:

(1) Clemen and Reilly, Making Hard Decisions, 2^{nd}
ed., 2001. In bookstore.

(2) Decision Tools software provided with book (requires Excel)

(3) Class notes. I will
generally post a set of PowerPoint slides on the web site when I use the slides
in the lecture. I try to post them before class, but sometimes I revise them at
the last minute, in which case they will be posted after class.

(4) Class handouts. Posted to
web page before class.

Class Web Page: http://classweb.gmu.edu/myoungre/SYST573

This course is a study of analytic techniques for
rational decision making that addresses uncertainty, conflicting objectives,
and risk attitudes. This course covers
modeling uncertainty; rational decision making principles; decisionmaking under
uncertainty without use of probability; representing decision problems with
utility functions, decision trees, and influence diagrams; solving
multi-attribute utility functions, decision trees and influence diagrams;
defining and calculating the value of data and information; incorporating risk
attitudes into the analysis; and conducting sensitivity analyses.

Course Objectives: Students will learn the concepts
associated with rational decision making and will learn how to structure and
solve simple decision problems associated with conducting systems engineering
trade-offs and managing systems engineering projects.

Assignments and Grading:

·
Readings: Readings will be assigned weekly; students are expected to
complete readings before class.

·
Homework: Homework will be assigned but not graded. Solutions will be
posted and discussed during the next class period after assignment. Although
not graded, students are highly encouraged to complete the homework, as the
exam questions will be similar to the homework assigned.

·
Undergraduate students (SYST 473): There will be a midterm and a final
exam. The midterm and final exam will constitute 40% and 60% of the grade
respectively.

·
Graduate Students: There will be a midterm, a final exam, and a
project. The midterm, final exams and the project will constitute 35%, 45% and
20% of the grade respectively.

Graduate Project: The
project can be done individually or as part of 2-3 person group. The project
should address a real life decision with either a personal or business focus.
It will work best if a friend or colleague was facing the decision, but usually
students pick a decision of their own. Occasionally students select a decision
that was made in the past and perform a retrospective analysis; this approach
is difficult because there is a lot of research that must be done to capture
the situation realistically. Students shall submit a statement about whether
they are going to do an individual or group project by the end of **third** class period. An abstract of the
decision that is the focus of the project shall be submitted by the end of the **sixth** class period. The abstract should
contain a summary of the decision and lists of tentative objectives and alternatives.

Project
Requirements for Decision/Risk Analysis

1.
Provide a summary of the decision problem (who is the decision-maker, what is
the decision time frame).

2.
Define the objectives hierarchy and utility functions (what are the objectives
and why are they objectives, what is the utility function for each bottom level
objective and what were the assessment queries used to define these functions,
what are the weights for the objectives

hierarchy
and what were the assessment queries used to define these weights).

3.
Define the alternatives.

4.
Define any uncertainties included in the analysis (define the variables, the
uncertain states, the conditioning variables, and the probability
distributions).

5.
Summarize the results of the analysis. Use decision trees and influence
diagrams (if appropriate).

6.
Describe the analysis computations.

7.
Provide sensitivity analyses for parameters that might change the recommended
decision.

8.
More detail will be provided by the sixth period.

Overview
& Discussion of Values, Measures, and Decisions

Simple
Decisionmaking Using Non-Stochastic and Stochastic Criteria

Decision
Structure: Influence Diagrams and Decision Trees

Making
Decisions: Solving Influence Diagrams and Decision Trees

Sensitivity
Analysis

Modeling
Uncertainty: Probability Applied to Decision Analysis and Risk Management

Risk
Attitudes and Utility

Multi-Attribute
Utility Functions

Advanced
Topics in Decision Analysis (if time permits – not graded)

Final
Exam

* Note: A topic may last more or less than one lecture period each depending on the topic complexity and class discussion

Schedule: Class
every Thursday, ^{rd}
to May 1^{st}