Degrees of Uncertainty

Statistical decision theory is based on the idea that a manager may face three degrees of uncertainty in making a decision. Some decisions are made under conditions of certainty. Here, the manager knows in advance the outcome of decision. At the opposite extreme, some decisions are made under conditions of uncertainty. Here, the manager cannot even assign probabilities to the likelihood of the various outcomes. Conditions of complete uncertainty are also relatively infrequent. Most management decisions are made under conditions of risk. Under conditions of risk, the manager can at least assign probabilities to each outcome. In other words, the manager knows (either from past experience or by making an educated guess) the chance that each possible outcome will occur.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

 

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