Then, in the 1940s, mathematician John von Neumann and economist Oskar Morgenstern developed an axiomatic basis for utility theory as a way of expressing an individual’s preferences over uncertain outcomes.
Once these basic theoretical developments had been established, the methods of decision analysis were then further codified and popularized, becoming widely taught (e.g., in business schools and departments of industrial engineering).
A brief and highly accessible introductory text was published in 1968 by decision theorist Howard Raiffa of the Harvard Business School.
[1] Subsequently, in 1976, Ralph Keeney and Howard Raiffa extended the basics of utility theory to provide a comprehensive methodology for handling decisions involving trade-offs between multiple objectives.
Although decision analysis is inherently interdisciplinary (involving contributions from mathematicians, philosophers, economists, statisticians, and cognitive psychologists), it has historically been considered a branch of operations research.
[5] The method has been used to support business and public-policy decision-making since the late 1950s; applications from 1990-2001 were reviewed in the inaugural issue of Decision Analysis.
In reality, however, many decisions can be made using qualitative tools that are part of the decision-analysis toolbox, such as value-focused thinking,[8] without the need for quantitative methods.
For example, quantitative methods of conducting Bayesian inference and identifying optimal decisions using influence diagrams were developed in the 1980s,[9][10] and are now incorporated in software.
It is sometimes assumed that quantitative decision analysis can be applied only to factors that lend themselves easily to measurement (e.g., in natural units such as dollars).
[14] However, when time permits, studies have demonstrated that quantitative algorithms for decision making can yield results that are superior to "unaided intuition".
Decision-analytic methods have been used in a wide variety of fields, including business (planning, marketing, negotiation), management, environmental remediation, health care, research, energy, exploration, litigation and dispute resolution, etc.