Decision Analysis

Abstract

Our earliest memories include the games played with friends and parents, sometimes for fun, sometimes for education. Similarly, the roots of decision analysis can be traced to game theory. Game theory is the study of probabilities and outcomes that occur when two or more players interact in a fixed setting. Although not widely applied to health care, an understanding of game theory is fundamental to decision analysis. We have all attempted game theory at an informal level. In a game of chess, players try not only to see which move is best, but also to predict how an opponent will react to the move. In Monopoly, a player might have to decide if it is profitable to buy Boardwalk if he or she does not own Park Place. In the latter situation, the player must estimate the probability that the random role of the dice will enable him or her to land on Park Place before his or her opponents or that an opponent would not elect to buy the property if given the opportunity. In game theory, players can be opponents or team players. In chess, the two players are opponents and have opposite goals. The player with the white pieces wants to win and therefore wants the player with the black pieces to lose. The player with the black pieces does not want to lose and does not want his or her opponent to win. Players who wish to minimize their opponents’ reward employ what is referred to as the “minimax” principle. I This principle states that if a game consists of a finite number of choices, a best strategy or optimal solution always exists. In the Game Theory: For Adults Only