Editing Decision analysis (section)

==History==

In 1931, mathematical philosopher [[Frank_Ramsey_(mathematician)|Frank Ramsey]] pioneered the idea of [[Probability_interpretations#Subjectivism|subjective probability]] as a [[Expected utility hypothesis#Ramsey-theoretic approach to subjective probability| representation]] of an individual’s beliefs or uncertainties. Then, in the 1940s, mathematician [[John von Neumann]] and economist [[Oskar Morgenstern]] developed an [[Expected utility hypothesis#Von_Neumann–Morgenstern_utility_theorem|axiomatic basis]] for [[Utility|utility theory]] as a way of expressing an individual’s preferences over uncertain outcomes. (This is in contrast to [[Social choice theory|social-choice theory]], which addresses the problem of deriving group preferences from individual preferences.)  Statistician [[Leonard Jimmie Savage]] then developed an alternate [[Expected utility hypothesis#Savage's subjective expected utility representation| axiomatic framework]] for decision analysis in the early 1950s.  The resulting expected-utility theory provides a complete axiomatic basis for decision making under uncertainty.

Once these basic theoretical developments had been established, the methods of decision analysis were then further codified and popularized, becoming widely taught (e.g., in business schools and departments of industrial engineering). The term "Decision Analysis" was first coined by [[Ronald A. Howard]] of [[Stanford University]] in a 1966 paper titled Decision Analysis: Applied Decision Theory.<ref>{{cite conference |last= Howard|first=Ronald A. |date=1966 |title=Decision Analysis: Applied Decision Theory|url=https://sdgintl.wpengine.com/wp-content/uploads/2015/06/Decision-Analysis-Applied-Decision-Theory.pdf |work= |book-title= |conference=Proceedings of the Fourth International Conference on Operational Research |location=Boston |publisher= |access-date=22 May 2025}}</ref> A brief and highly accessible introductory text was published in 1968 by decision theorist [[Howard Raiffa]] of the [[Harvard Business School]].<ref>{{cite book|author1=Raiffa, H. |name-list-style=amp |title=Decision Analysis: Introductory Lectures on Choices Under Uncertainty|year=1968|publisher=Addison-Wesley|location=Reading, MA}}</ref> Subsequently, in 1976, Ralph Keeney and [[Howard Raiffa]] extended the basics of utility theory to provide a comprehensive methodology for handling decisions involving trade-offs between multiple objectives.<ref>{{cite book|author1=Keeney, R.  |author2=Raiffa, H. |name-list-style=amp |title=Decisions with Multiple Objectives: Preferences and Value Tradeoffs|year=1976|publisher=Wiley|location=New York}}</ref> Engineering professor [[Ronald_A._Howard|Ron Howard]] of [[Stanford University]] and decision analyst Jim Matheson then published, in 1977, a set of readings on decision analysis;<ref>{{cite book|author1=Howard, R.A. |author2=Matheson, J.E.|name-list-style=amp |title=Readings in Decision Analysis|year=1977|publisher=SRI International|location=Menlo Park, CA}}</ref> this was expanded into a two-volume set in 1984.<ref>{{cite book|author1=Howard, R.A. |author2=Matheson, J.E.|name-list-style=amp |title=Readings on the Principles and Applications of Decision Analysis|year=1984|publisher=Strategic Decisions Group|location=Menlo Park, CA}}</ref> Subsequent textbooks and additional developments are documented below under [[#Further_reading|Further reading]].

Although decision analysis is inherently interdisciplinary (involving contributions from mathematicians, philosophers, economists, statisticians, and cognitive psychologists), it has historically been considered a branch of [[operations research]]. In 1980, the Decision Analysis Society was formed as a special interest group within Operations Research Society of America (ORSA), which later merged with The Institute of Management Sciences (TIMS) to become the [[Institute_for_Operations_Research_and_the_Management_Sciences|Institute for Operations Research and the Management Sciences (INFORMS)]]. Beginning in 2004, INFORMS has published a dedicated journal for these topics, Decision Analysis.

Following along with these academic developments, decision analysis has also evolved into a mature professional discipline.<ref>{{cite journal |last1=Ulvila |first1=J.W. |first2=R.V. |last2=Brown |title=Decision Analysis Comes of Age |journal=Harvard Business Review |year=1982 |volume=60 |issue=5 |pages=130–141 |pmid=10257404 }}</ref> The method has been used to support business and public-policy decision-making since the late 1950s; applications from 1990-2001 were reviewed in the inaugural issue of Decision Analysis.<ref>{{cite journal |last1=Keefer |first1=D.L. |first2=C.W. |last2=Kirkwood |first3=J.L. |last3=Corner |title=Perspective on Decision Analysis Applications, 1990–2001 |journal=Decision Analysis |year=2004 |volume=1 |issue=1 |pages=5–38 |doi=10.1287/deca.1.1.5.17844 |doi-broken-date=26 January 2025 }}</ref>  Decision analysis has been especially widely adopted in the pharmaceutical industry and the oil and gas industry, since both industries regularly need to make large high-risk decisions (e.g., about investing in development of a new drug or making a major acquisition).<ref name="SB HBR">{{cite journal |last1=Sharpe |first1=P. |first2=T. |last2=Keelin |title=How SmithKline Beecham Makes Better Resource-Allocation Decisions |journal=Harvard Business Review |year=1998 |volume=76 |issue=2 |pages=3–10 |pmid=10177866 }} </ref>