The date in brackets at the end of each entry below shows when that entry was added to this page.
As an example, for the value tree shown in Figure 2.1, it is only necessary to develop evaluation measures for software outlay; training, maintenance, and upgrades; hardware outlay; technical graphics; tables; automation and customization; interoperability; layout, editing, and formatting; long documents and proofing; marketing graphics; printing and mail merge; and interface. That is, a total of twelve evaluation measures are needed for this value tree. Evaluation measures are not needed for purchase best value software; cost; suitability for use; production, R&D, and engineering; finance and administration; or marketing because these considerations each consist of other elements lower in the hierarchy that have evaluation measures associated with them. [February 24, 1998]
Specifically, this procedure does not require determination of weights for evaluation considerations that do not have evaluation measures associated with them. For example, in the value tree shown in Figure 2.1 (page 14), it is not necessary to determine weights for cost; suitability for use; production, R&D, and engineering; finance and administration; or marketing. (If you wish to associate a weight with one of these considerations, then a reasonable method of doing this is to add up the weights that have been determined for the evaluation measures below this consideration.)
Other procedures for determining weights have been proposed that explicitly consider the hierarchical structure of the value tree. For more information about differences that can result from using different weight assessment procedures, see the following: 1) W. G. Stillwell, D. von Winterfeldt, and R. S. John, "Comparing Hierarchical and Nonhierarchical Weighting Methods for Eliciting Multiattribute Value Models," Management Science, Vol. 33, No. 4, pp. 442-450 (April 1987), and 2) M. Weber, R. Eisenführ, and D. von Winterfeldt, "The Effects of Splitting Attributes on Weights in Multiattribute Utility Measurement," Management Science, Vol. 34, No. 4, pp. 431-445 (April 1988). [February 24, 1998]
A simplified version of the weight assessment procedure presented in Section 4.4, called the Swing Weight Matrix Method, is presented in the context of specific applications by P. L. Ewing Jr., W. Tarantino, and G. S. Parnell, "Use of Decision Analysis in the Army Base Realignment and Closure (BRAC) 2005 Military Value Analysis," Decision Analysis, Vol. 3, No. 1, pp. 33-49 (March 2006), and T. Trainor, G. S. Parnell, B. Kwinn, J. Brence, E. Tollefson, and P. Downes, "The US Army Uses Decision Analysis in Designing Its US Installation Regions," Interfaces, Vol. 37, No. 3, pp. 253-264, May-June 2007. [October 8, 2012]
See also J. Eric Bickel, "Some Determinants of Corporate Risk Aversion," Decision Analysis, Vol. 3, No. 4, pp. 233-251 (December 2006) for further consideration of rationales for corporate attitudes toward risk taking. Bickel concludes that he is unable to fully support the degree of corporate risk aversion reported in the decision analysis literature. [October 8, 2012]
Suppose that you own three fast food restaurants that are run down but functional. You have a budget of 250 thousand dollars to renovate one or more of the restaurants. You develop evaluation measures and a multiobjective value function to score the current conditions of the restaurants and what their conditions would be if they were renovated. The cost of renovating each restaurant, as well as the current and renovated values, are as follows:
The two competitive combinations of projects that could be completed within the budget are to either renovate only Restaurant 1, or to renovate both Restaurants 2 and 3. Assuming that the values of projects add, then it may appear that the combination of renovating Restaurants 2 and 3 should be selected since this has a value of 0.40+0.30=0.70 versus 0.55 for renovating Restaurant 1. However, this is not the complete story. The fourth column of the table shows the current values of the three restaurants, and the right-most column shows the difference between the renovated and current values. The value increment from renovating Restaurant 1 is greater than the sum of the value increments from renovating Restaurants 2 and 3 (0.25 versus 0.15+0.05=0.20). It can be proved that value increments should be used in selecting the best combination of projects, and hence Restaurant 1 should be renovated. If not selecting a particular project has a cost, then that cost needs to be taken into account. This does not change the value associated with selecting a particular set of projects, but it might make some combinations of projects infeasible. See this link for a presentation of the theory for addressing portfolios where not selecting a project may have a value or cost. This is discussed further in R. T. Clemen and J. E. Smith, "On the Choice of Baselines in Multiattribute Portfolio Analysis: A Cautionary Note," Decision Analysis, Vol. 6, No. 4, pp. 256-262 (December 2009). [March 10, 2009; March 19, 2009; January 9, 2010]
Last updated October 8, 2012.