1. Bayesian decision Analysis: Advantages: 1. Uses a rational and methodological approach to policy determination. 2. Allows incorporation of new information or “expert” judgments. 3. Provides a formal method to estimate the worth of additional information to bear on a problem. 4. Makes it possible to do a sensitivity analysis to identify critical factors in the analysis. 5. Provides a direct way to compare policies and encourages the decision maker to scrutinize his problem as an organic whole.

2. 6. Helps the decision maker decompose a large problem into a series of small problems. 7. Forces decision maker to make his assumptions explicit. 8. May improve communications among executives. 9. May suggest the gathering, compilation and organization of data from new sources. 10. Analysis may serve as a stimulus for the decision maker to think hard about new, viable alternative actions. 11. Analysis provides a framework for contingency planning.

3. Disadvantages / Difficulties: 1. Cost may be prohibitive. 2. Time may not allow a complete analysis. 3. Special care must be taken to insure that the states of nature are mutually exclusive and exhaustive. Priors sometimes difficult to establish. 4. Differences in risk aversion may make the expected value criterion inappropriate. 5. Payoffs or consequences of alternatives may be uncertain. 6. May be difficult to implement where the decision making process is fairly diffused.

4. 7. A high level of personal competence with respect to decision analysis is required. 8. Some decision makers are unwilling to use subjective judgments to measure uncertainty where information about an uncertain quantity is sparse. 9. Some decision makers have a strategy in decision making of removing uncertainty and not trying to improve their ability with uncertain situations. 10. May be more appropriate for a more frequent decision – rather than a one time decision with major consequences.