Making Decisions under Uncertainty
Making Decisions under Uncertainty IF THE DRUG DEALER IS making a random decision between going to the park and selling on a street corner, a police officer who is deciding where to patrol faces an uncertain outcome. If she patrols the park, the extent of her success in dis- rupting the drug traffic depends on whether the dealer plies his trade in the park that day. To determine an optimal strategy, the police officer has to eval- uate options when the outcome is uncertain. Figuring out an approach to modeling decision making under uncertainty is the task of this section.
The first step is to quantify the uncertainty. This is done through the con- cepts of probability and expectation, which are covered in Section 7.2.1. These concepts are then applied in Section 7.2.2, in a method for comparing alter- natives under uncertainty. Finally, in Section 7.2.3, we discuss the important issue of the interpretation of a payoff (or utility) when there is uncertainty.