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Article: Sensitivity analysis in decision making under risk with three states of nature: a linear programming approach.
- Article from:
- Journal of Academy of Business and Economics
- Article date:
- January 1, 2007
- Author:
CopyrightCOPYRIGHT 2007 International Academy of Business and Economics. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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ABSTRACT
In decision making under risk, we often resort to sensitivity analysis to understand how the selection of an optimal alternative would be affected by the variations in the probability estimates of the states of nature. If the problem deals with only two states of nature and a limited number of alternatives, the graphical method can be used to determine the optimal alternative for different ranges of the probabilities. But, if we have many alternatives to consider, it becomes very cumbersome to use the graphical method. Further, if we have more than two states of nature, the graphical method is of no help to us in doing the sensitivity analysis. In this ...