decision theory

Definition

Framework of logical and mathematical concepts, aimed at helping managers in formulating rules that may lead to a most advantageous course of action under the given circumstances. Decision theory divides decisions into three classes (1) Decisions under certainty: where a manager has far too much information to choose the best alternative. (2) Decisions under conflict: where a manager has to anticipate moves and counter-moves of one or more competitors. (3) Decisions under uncertainty: where a manager has to dig-up a lot of data to make sense of what is going on and what it is leading to. See also game theory.