Engineering Decision Making and Risk Management

Jeffrey W. Herrmann, PhD, is Associate Professor at the University of Maryland, where he holds a joint appointment with the Department of Mechanical Engineering and the Institute for Systems Research. A member of the Institute of Industrial Engineers, the Institute for Operations Research and the Management Sciences, the American Society of Mechanical Engineers, and the American Society for Engineering Education, Dr. Herrmann’s research interests include production scheduling, decision making in product development, and public health preparedness planning.

• Preface xi1 Introduction to Engineering Decision Making 11.1 Introduction 11.2 Decision Making in Engineering Practice 41.3 Decision Making and Optimization 51.4 Decision Making and Problem Solving 61.5 Decision Making and Risk Management 71.6 Problems in Decision Making 81.7 The Value of Improving Decision Making 81.8 Perspectives on Decision Making 9Exercises 10References 122 Decision-Making Fundamentals 152.1 Decision Characteristics 162.2 Objectives in Decision Making 172.3 Influence Diagrams 222.4 Rationality 242.5 Dominance 292.6 Choice Strategies 312.7 Making Tradeoffs 332.8 Reframing the Decision 342.9 Risk Acceptance 362.10 Measurement Scales 37Exercises 39References 463 Multicriteria Decision Making 513.1 Pugh Concept Selection Method 543.2 Analytic Hierarchy Process 563.3 Multiattribute Utility Theory 623.4 Conjoint Analysis 673.5 Value of a Statistical Life 703.6 Compensation 713.7 The Impact of Changing Weights 74Exercises 76References 814 Group Decision Making 854.1 Ranking 884.2 Scoring and Majority Judgment 924.3 Arrow’s Impossibility Theorem 95Exercises 96References 995 Decision Making Under Uncertainty 1015.1 Types of Uncertainties 1035.2 Assessing a Subjective Probability 1055.3 Imprecise Probabilities 1075.4 Cumulative Risk Profile and Dominance 1085.5 Decision Trees: Modeling 1105.6 Decision Trees: Determining Expected Values 1125.7 Sequential Decision Making 1145.8 Modeling Risk Aversion 1155.9 Robustness 1205.10 Uncertainty Propagation: Sensitivity Analysis 1255.11 Uncertainty Propagation: Method of Moments 1275.12 Uncertainty Propagation: Monte Carlo Simulation 129Exercises 132References 1386 Game Theory 1416.1 Game Theory Basics 1446.2 Zero-Sum Games 1446.3 Optimal Mixed Strategies for Zero-Sum Games 1456.4 The Minimax Theorem 1476.5 Resource Allocation Games 1476.6 Mixed Motive Games 1486.7 Bidding 1516.8 Stackelberg Games 152Exercises 153References 1577 Decision-Making Processes 1617.1 Decision-Making Contexts 1647.2 Technical Knowledge and Problem Consensus 1657.3 Optimization: Search and Evaluation 1697.4 Diagnosing Risk Decision Situations 1707.5 Values and Ethics 1717.6 Systematic Decision-Making Processes 1727.7 The Decision-Making Cycle 1747.8 The Analytic-Deliberative Process 1757.9 Concept Selection 1767.10 Decision Calculus 1777.11 Recognition-Primed Decision Making 1787.12 Heuristics 1787.13 Unconscious Decision Making 1797.14 Search 1797.15 Types of Search in Practice 1837.16 Secretary Problem 1857.17 Composite Decisions 1877.18 Separation 1897.19 Product Development Processes 194Exercises 197References 2008 The Value of Information 2078.1 The Expected Value of Perfect Information 2128.2 The Expected Value of Imperfect Information 2148.3 Experimentation to Reduce Ambiguity 2218.4 Experimentation to Compare Alternatives 2258.5 Experimentation to Compare Alternatives with Multiple Attributes 228Exercises 232References 2379 Risk Management 2399.1 Risk Management Process 2449.2 Potential Problem Analysis 2479.3 Risk Management Guide for DOD Acquisition 2529.4 Risk Management at NASA 2539.5 Precursors 2549.6 Warnings 2579.7 Risk Communication 2599.8 Managing the Risk of a Bad Decision 2659.9 Learning from Failures 2719.10 Transforming Failure Information 275Exercises 276References 28210 Decision-Making Systems 28910.1 Introduction to Decision-Making Systems 29110.2 Mechanisms of Organization Influence 29210.3 Roles in Decision-Making Systems 29310.4 Information Flow 29610.5 The Structure of Decision-Making Systems 29710.6 Product Development Organizations 29810.7 Information Flow in Product Development 29910.8 The Design Factory 302Exercises 302References 30311 Modeling and Improving Decision-Making Systems 30711.1 Modeling Decision-Making Systems 30911.2 Rich Pictures 31011.3 Swimlanes 31111.4 Root Definitions 31311.5 Conceptual Models 31511.6 Models of Product Development Organizations 31711.7 Improving Decision-Making Systems 31711.8 An Integrative Strategy 319Exercises 325References 326Index 331

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