Introduction to decision analysis Biotieteellinen tiedekunta / Henkilön nimi / Esityksen nimi 16.9.2018

Outline Decision analysis: for what? Three components of the decision problem Decisions Causalities & Uncertainty Utility or loss Examples Exercises Biotieteellinen tiedekunta / Henkilön nimi / Esityksen nimi 16.9.2018

Decision analysis Normative model for decision making: this is how a ”rational agent” would behave under uncertainty A Rational agent reasons using probability theory and maximizes its expected utility or ”well being” Can be used to make automated decisions: artificial intelligence Support human decision making: analyse complex systems to provide insight to expected impacts of alternative decisions Biotieteellinen tiedekunta / Henkilön nimi / Esityksen nimi 16.9.2018

Variety of applications Decide about… Sports betting Investments Fishing quotas Nature conservation strategies Medical treatments Etc… Biotieteellinen tiedekunta / Henkilön nimi / Esityksen nimi 16.9.2018

Decision analysis: the three components Alternative actions to take Causality State of nature State of the world and uncertainty about it as degrees of belief Valuation Utility or Loss Valuation of different states of the world: how much we like each state? Biotieteellinen tiedekunta / Henkilön nimi / Esityksen nimi 16.9.2018

Example: Location of a school of fish – where to go fishing? The school can be located in offshore (s) or in estuary (e) Initial knowledge: P(s)=0.8 Fishing costs: Estuary : 500e Offshore : 1000e Income, if fish are found Estuary: 3000e Offshore: 2500e

Example: where to go fishing? Alternative actions to take Fishing area Cost Profit Causality Location of the fish school Income Valuation of profit State of the world and uncertainty about it as degrees of belief Valuation of different states of the world: how much we like each state? Biotieteellinen tiedekunta / Henkilön nimi / Esityksen nimi 16.9.2018

Expected utilities : go fishing offshore IF fishing in estuary IF fish are in estuary: Profit = 3000e -500e = 2500e IF fish are not there: Profit = 0e – 500e = -500e E(Profit | fishing in estuary) = 0.2 x 2500 + 0.8 x (-500) = 100e IF fishing offshore IF fish are offshore: Profit = 2500e – 1000e = 1500e IF fish are not there: Profit = 0e – 1000e = -1000e E(Profit | fishing offshore) = 0.8 x 1500 + 0.2 x (-1000) = 1000e Biotieteellinen tiedekunta / Henkilön nimi / Esityksen nimi 16.9.2018