The Judgment-Elicitation Process for Multicriteria Decision Making

Abstract

This article, written by Assistant Technology Editor Karen Bybee, contains highlights of paper IPTC 12502, "Judgment Elicitation Process for Multi-Criteria Decision-Making in Oil and Gas Industry," by Lev Virine, SPE, Schlumberger, originally prepared for the 2008 International Petroleum Technology Conference, Kuala Lumpur, 3–5 December. The paper has not been peer reviewed. Decision making related to oil and gas exploration and production relies on objective data analysis as well as on the subjective judgment of experts. Expert judgment often is considered to be less accurate than objective data analysis. By improving the judgment-elicitation process particularly in the case of multicriteria decision making, it is possible to improve the quality of critical decisions. Proper use of judgment-elicitation techniques together with objective data analysis will lead to significantly better decisions related to oil and gas exploration and production. Introduction Uncertainty assessment in the petroleum industry can be performed on the basis of objective information, such as using analogs or actual production data, as well as by interviewing experts. Traditionally, expert judgment has been considered to be less accurate than objective data analysis because of inherited biases. However, recent research shows that subjective expert judgment can be accurate as long as it is elicited properly. In other words, the experts need to be asked the proper questions in a proper order. The judgment-elicitation process should be designed properly for the particular problem. There are two types of biases: cognitive and motivational. Cognitive biases show up in the way we process information. In other words, they are distortions in the way reality is perceived. There are many forms of cognitive bias, but they can be separated into a few groups:Behavioral biases influence how beliefs are formed. An example is the illusion of controlling something that we cannot influence. Another example is our tendency to seek information even when it cannot affect the project.Perceptual biases can skew the ways we see reality and analyze information. An example of one of the more common perceptual biases is overconfidence. Many project failures originate in our tendency to be more certain than we should be that a certain outcome will be achieved.Probability and belief biases are related to how we judge the likelihood that something will happen. This set of biases can especially affect cost and price estimates.Social biases are related to how our socialization affects our judgment. It is impossible to find anyone who manages an oil and gas exploration and production project in complete isolation.Memory biases influence how we remember and recall certain information and can affect judgment elicitation. An example is hindsight bias ("I knew it all along").