Course: Decision Analysis Models and Applications (PhD in
Engineering and Management, PhD in Engineering and Public Policy)
Lecturers
Carlos A. Bana e Costa (Responsible)
Carlos A. Bana e Costa is a Full Professor of Decision and Information at IST, DEG, and a Researcher
at the Centre for Management Studies of IST (CEG-IST). He is also head of I&D projects at CEG-IST.
Professor Bana e Costa's primary interests are in the fields of Management and Decision Sciences,
namely Multicriteria Decision Analysis and Decision Conferencing. He has widely published in
these areas (http://web.ist.utl.pt/carlosbana/bin/papers.htm) and he co-authored the MACBETH
approach for decision-aiding (http://www.m-macbeth.com). He has also been developing
consultation in public strategic decision-making processes, policy appraisal and bid and suppliers'
performance evaluation worldwide, following the socio-technical facilitation perspective shared by
the members of the International Decision Conferencing Forum. He is also a senior partner of
BANA Consulting (http://www.bana-consulting.pt).
Webpage: http://web.ist.utl.pt/carlosbana/bin/index.htm Email: [email protected]
Mónica Oliveira
Monica Oliveira is an Assistant Professor at IST, DEG, and a Researcher at the CEG-IST. Monica has
been carrying out research in the area of management of health care systems, whose main
interests are in health care planning and financing and in resource allocation in health care.
Monica has published in journals in the areas of health economics, health policy and health care
management, has participated in several health policy projects sponsored by the European
Commission, and has been involved in advisory boards from the Portuguese Ministry of Health.
Webpage: http://web.ist.utl.pt/monica.oliveira/ Email: [email protected]
Course material
Course material available in the following Fenix webpage:
https://fenix.ist.utl.pt/disciplinas/maad-2/2010-2011/2-semestre/teaching-material-for-thedama-course with material protected by the password (to be announced in class)
Objectives
This course provides an introduction to models, processes and tools for helping to structure and
explore decisions characterized by multiple objectives, uncertainty, complexity and differences of
opinion. Based on theoretical and methodological concepts of decision-making and decision aid
Decision Analysis Models and Applications, 2011
1
research, the course has an emphasis on the practice of decision sciences. It uses illustrations of
real-world decision analysis and decision conferencing applications in organisations, and employs
several case-studies (supported by specialised decision support software) to build students' skills
in decision modelling and analysis.
Program
Weeks Dates
Topic
Content
What is Decision Analysis? Basic concepts. Decisionmaking strategies and traps in private and public
contexts. Schools of thought. A Taxonomy of Decision
Analysis models. Decision Analysis with groups:
Decision conferencing and Features of requisite
decision modelling.
Value and utility theory. Building a model of values.
Value trees and descriptors of performance. The
additive value model. Techniques for building value
functions. Techniques for weighting criteria. Sensitivity
and robustness analysis. The MACBETH approach.
2-4
10th, 17th,
24th
February
Introduction to Decision
Analysis
5-8
3th, 10th,
17th, 24th
March
Multi-Criteria Value
Measurement
9
31st
March
Structuring Approaches
Value-focused thinking. Problem structuring methods.
10
7th April
Resource Allocation,
Prioritization and
Budgeting
The generic model structure for resource allocation
and the Commons Dilemma. Value for money
prioritization.
11-13
14th, 28th
April, 5th
May
Modelling Risk and
Uncertainty
What is Risk Analysis? Basic concepts. Scenario
building. Decision trees and influence diagrams. Value
of information and control. Bayesian belief networks.
Probability modelling and expert judgment. Simulation.
Risk attitude and Multicriteria Utility theory.
14
12th May
(double
session)
Decision Analysis Models and Applications, 2011
Presentation and Discussion of Case Studies by
Students.
2
Bibliography
Topic: Introduction to Decision Analysis
Phillips, L.D. (2005) Decision analysis in 2005. OR47: Keynote and Tutorials.
Parnell, G. (2009) Decision Analysis in One Chart, Decision Line, 20-24.
Howard, R. (1973) Decision Analysis in Systems Engineering in Miles, Jr., R. F. (Ed.). Systems
concepts: Lectures on contemporary approaches to systems. New York: John Wiley.
Morton, A., Fasolo, B. (2008). Behavioural Decision Theory for Multi-Criteria Decision Analysis: a
guided tour. Journal of the Operational Research Society, 60, 268–275.
Russo, J., Schoemaker, P.J.H. (1989) Decision traps, Doubleday Business.
Hammond, J.S., Keeney, R.L., Raiffa, H. (1999) Smart Choices: A Practical Guide to Making Better
Decisions, Harvard Business School Press.
Edwards, W., Miles Jr., R. F., von Winterfeldt, D. (Eds.) (2007), Advances in Decision Analysis: From
Foundations to Applications, Cambridge: Cambridge University Press.
Phillips, L. (2007) Decision conferencing. In Advances in Decision Analysis. In W. Edwards & R. F.
Miles Jr. & D. von Winterfeldt (Eds.), Advances in Decision Analysis: From Foundations to
Applications (pp. 232-252). Cambridge: Cambridge University Press.
Phillips, L.D. (1984) A theory of requisite decision models. Acta Psychologica, 56, 29–48.
Keeney, R. L. (1996) Value-focused thinking: Identifying decision opportunities and creating
alternatives, European Journal of Operational Research, 92, 537-549.
Goodwin, P. and G. Wright (2010). Decision Analysis for Management Judgment. Chichester, John
Wiley.
Topic: Multi-criteria value measurement
Belton, V., Stewart, T.J. (2001) Multiple Criteria Decision Analysis: An Integrated Approach,
Springer.
Keeney, R. L., Raiffa, H. (1993) Decisions with Multiple Objectives: Preferences and Value Tradeoffs. Cambridge: Cambridge University Press, 2nd ed.
Bana e Costa, C. A., De Corte, J.-M., Vansnick, J.-C. (2003) MACBETH, Working Paper LSEOR 03.56,
London School of Economics of Political Science.
Decision Analysis Models and Applications, 2011
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Bana e Costa, C. A., De Corte, J.-M., Vansnick, J.-C. (2010) MACBETH (Measuring Attractiveness by
a Categorical Based Evaluation Technique), In: J.J. Cochran (Ed.), Wiley Encyclopedia of Operations
Research and Management Science, Wiley.
Bana e Costa, C. A., Chagas, M. (2004). A career choice problem: an example of how to use
MACBETH to build a quantitative value model based on qualitative value judgments. European
Journal of Operational Research, 153(2), 323-331.
Bana e Costa, C., Lourenço, J. C., Chagas, M. P., Bana e Costa, J. C. (2008). Development of reusable
bid evaluation models for the Portuguese Electric Transmission Company. Decision Analysis, 5(1),
22-42.
Bana e Costa, C. A., Beinat, E. (2005) Model-structuring in public decision-aiding, Working paper
LSEOR 05.79, London School of Economics and Political Science.
Stevens, S. S. (1946) On the Theory of Scales of Measurement, Science, 103, 2684, 677-680
Nunnally, J.C., Bernstein, I.H. (1994). Psychometric Theory, 3rd ed. (Chapter 1).
Bana e Costa, C.A., Fernandes, T.G., Correia, P.V.D. (2006) Prioritisation of public investments in
social infrastructures using multicriteria value analysis and decision conferencing: a case study,
International Transactions in Operational Research, 13, 279–297.
Topic: Structuring methodologies
Keeney, R.L. (1992) Value-Focused Thinking: A Path to Creative Decisionmaking, Harvard University
Press.
Belton, V. (1999) Multi-Criteria Problem Structuring and Analysis in a Value Theory Framework; V.
Belton. In Gal, Tomas; Stewart, Theodor J.; Hanne, Thomas (Eds.) Multicriteria Decision Making
Advances in MCDM Models, Algorithms, Theory and Applications, Series: International Series in
Operations Research & Management Science , Vol. 21.
Bana e Costa, C.A., Ensslin, L., Corrêa, E.C., Vansnick, J.-C. (1999) Decision Support Systems in
action: Integrated application in a multicriteria decision aid process, European Journal of
Operational Research 113, 315-335.
Bana e Costa C.A. (2001) The use of multi-criteria decision analysis to support the search for less
conflicting policy options in a multi-actor context: case study, Journal of Multi-Criteria Decision
Analysis, 10, 2, 111-125.
Decision Analysis Models and Applications, 2011
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Topic: Resource Allocation, Prioritization and Budgeting
Phillips, L.D., Bana e Costa, C.A. (2007) Transparent prioritisation, budgeting and resource
allocation with multi-criteria decision analysis and decision conferencing, Annals of Operations
Research, 154, 1, 51-68.
Kirkwood, C. W. (1997). Strategic decision making: multiobjective decision analysis with
spreadsheets. Belmont, Duxbury.
Liesiö, J., Mild, P., Salo, A. (2008). Robust portfolio modeling with incomplete cost information and
project interdependencies. European Journal of Operational Research, 190(3), 679-695.
Lourenço, J.C., Bana e Costa, C.A., Morton, A. (2008, 28-30 June). Software packages for multicriteria resource allocation. Paper presented at the IEEE International Engineering Management
Conference, IEMC - Europe 2008, Estoril, Portugal.
Lourenço, J.C., Bana e Costa, C.A. (2009) PROBE - A multicriteria decision support system for
portfolio robustness evaluation, LSEOR 09.108, Working Paper, London School of Economics and
Political Science.
Topic: Modelling Risk and Uncertainty
Clemen, R. T., Reilly, T. (2003) Making Hard Decisions With Decision Tools Suite Update 2004.
Duxbury.
Morgan, M. G., Henrion, M. (1990) Uncertainty: A Guide to Dealing with Uncertainty in
Quantitative Risk and Policy Analysis. Cambridge: Cambridge University Press.
Ringland, G. (2006). Scenario Planning - Managing the Future. England, John Wiley & Sons.
Shoemaker, P. J. H. (1995) Strategic planning: A tool for strategic thinking, Sloan Management
Review, 25-40.
Kaplan, S. (1997) The Words of Risk Analysis, Risk Analysis, 17(4), 407-417.
Jensen, F.V. (1996) An Introduction to Bayesian Networks, UCL Press, London (chapter 2).
Howard, R. A., Matheson, J. E. (2005). Influence diagrams. Decision Analysis, 2(3), 127-143.
Eppel, T., von Winterfeldt, D. (2008) Value-of-Information Analysis for Nuclear Waste Storage
Tanks, Decision Analysis, 5(3), 157-167.
Hoffmann, S., Fischbeck, P., Krupnick, A., McWilliams, M. (2007) Elicitation from Large,
Heterogeneous Expert Panels: Using Multiple Uncertainty Measures to Characterize Information
Quality for Decision Analysis, Decision Analysis, 4, 2, 91-109.
Decision Analysis Models and Applications, 2011
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Mannes, A. E. (2009) Are We Wise About the Wisdom of Crowds? The Use of Group Judgments in
Belief Revision, Management Science, 55(8), 1267-1279.
Kynn, M. (2008) The ‘heuristics and biases’ bias in expert elicitation, Journal of Royal Statistical
Society A, 171, 1, 239-264.
Shephard, G., Kirkhood, C. (1994) Managing the judgmental probability elicitation process: A case
study of analyst-manager interaction, IEEE Transactions on Engineering Management, 41, 4
Kirkwood, C. W. (2004) Approximating Risk Aversion in Decision Analysis Applications, Decision
Analysis, 1, 51-67.
A. Morton, M. Airoldi, L. D. Phillips (2009) Nuclear Risk Management on Stage: A Decision Analysis
Perspective on the UK’s Committee on Radioactive Waste Management, Risk Analysis, 29(5), 764779.
Matos, M. (2007) Decision under risk as a multicriteria problem, European Journal of Operational
Research, 181(3), 1516-1529.
Figueiredo, M. S. M., Oliveira, M. D. (2009). Prioritizing Risks based on Multicriteria Decision Aid
Methodology: Development of Methods applied to ALSTOM Power, Proceedings of the IEEE
International Conference on Industrial Engineering and Engineering Management, 1-4, 1568-1572.
Evaluation
The evaluation includes the following components:
•
•
3 assignments (50%):
o Individual summary, presentation and critical discussion of one paper in class;
o 2 assignments developing models using the software M-MACBETH, Precision Tree,
@Risk and/or PROBE.
Final exam (50%).
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