The unknown in decision making: What to do about it

Mujgan Sagir Ozdemir
Industrial Engineering
Eskisehir Osmangazi University
Thomas Saaty
Joseph M. Katz Graduate School of Business
University of Pittsburgh
United States

Publication date: Oct, 2006

Journal: European journal of operational research
Vol.: 171- Issue: 4- Pages: 349-359

Abstract: The unknown or “other” that affects our lives is what we usually very much want to know about to cope with uncertainty. We often suspect that it affects us with partial and indefinite evidence that it exists but we only have uncertain feelings about it. Even when we do not know what it is we would like to allow for its influence in our explaining the outcome of a decision. One way to deal with the many factors of a decision is to include the unknown as one of them and then determine its priority of influence on the outcome by comparing it with other factors. We are able to do that to the extent that we are sure of what we know and of the residual that remains outside our understanding that may also have some effect on what we do. Confidence from good understanding and past success are what we need in order to judge the potential significance of what we do not know on the outcome. We can then perform sensitivity analysis to see how much effect unknown factors can have on the stability of the choice we make. Pairwise comparisons make it possible to tackle this idea explicitly and rather simply. This note illustrates how to prioritize and test the effect of the unknown alongside the known.

Keywords: Decision making, Analytic Hierarchy Process, AHP, Confidence, Sensitivity analysis