12 Decision Making Under Uncertainty

Abstract

This is a course material from the book Investment Decision Making. For Firm and Project Valuation. The book is originally in Spanish and is untitled as Decisiones de inversion. Para la valoracion financiera de proyectos y empresas. Chapter 12 studies the problem of making decisions under risk and uncertainty. We present basic ideas on sensitivity analysis for one and several variables, game theory, decision trees, cardinal utility theory and Montecarlo simulation. We include some new subjects such as the Analytical Hierarchical Process, AHP and the Analytic Network Process, ANP, methods Developer by professor Thomas L. Saaty and a very short introduction to financial and real options.