Risk and Uncertainty Revisited: A Clarification of Theory and Application

In addition to the obvious public confusion and lack of distinction between the terms, risk and uncertainty and other related concepts, the interchangeable use seems to seep into the academic and professional research. According to a 2018 study by De Groot and Thurik, it was reported that 88.3% of articles in this topic, across the related fields, did not adhere to the distinction between risk and uncertainty, rendering all the undesirable theoretical and empirical consequences. This paper is intended to revisit the concepts of risk and uncertainty, not only clarifying the meaning and use of the terms, but also shedding a light on differentiating all the related concepts. The focus is on risk, being the core element directly related to the success and failure of all financial and managerial decision making. The approach is not only conceptual, but also supported by mathematical and numerical applications.

Download Full-text

Application of the theory of decision making under risk and uncertainty at modelling of costs

Agricultural Economics (Zemědělská ekonomika) ◽

10.17221/88/2009-agricecon ◽

2010 ◽

Vol 56 (No. 5) ◽

pp. 201-208 ◽

Cited By ~ 1

Author(s):

M. Beranová ◽

D. Martinovičová

Keyword(s):

Decision Making ◽

Financial Accounting ◽

Cost Functions ◽

Risk And Uncertainty ◽

Managerial Decision ◽

Managerial Decision Making ◽

Bayesian Theorem ◽

Long Run ◽

Short Run ◽

The Cost

The costs functions are mentioned mostly in the relation to the Break-even Analysis where they are presented in the linear form. But there exist several different types and forms of cost functions. Fist of all, it is necessary to distinguish between the short-run and long-run cost function that are both very important tools of the managerial decision making even if each one is used on a different level of management. Also several methods of estimation of the cost function's parameters are elaborated in the literature. But all these methods are based on the past data taken from the financial accounting while the financial accounting is not able to separate the fixed and variable costs and it is also strongly adjusted to taxation in the many companies. As a tool of the managerial decision making support, the cost functions should provide a vision to the future where many factors of risk and uncertainty influence economic results. Consequently, these random factors should be considered in the construction of cost functions, especially in the long-run. In order to quantify the influences of these risks and uncertainties, the authors submit the application of the Bayesian Theorem.

Download Full-text

Technology Imperative in Managerial Decision-Making

Advances in Human Resources Management and Organizational Development - Collaborative Communication Processes and Decision Making in Organizations ◽

10.4018/978-1-4666-4478-6.ch009 ◽

2014 ◽

pp. 158-176 ◽

Cited By ~ 6

Author(s):

Neeta Baporikar

Keyword(s):

Decision Making ◽

Decision Makers ◽

Limited Information ◽

Managerial Decision ◽

Managerial Decision Making ◽

Face To Face ◽

The Core ◽

Use Of Technology ◽

Management Approaches ◽

Virtual Setting

Decisions can make or mar an organization. Decision-making is a multifaceted and intricate process. This process becomes even more complicated and complex when it comes to organizations, especially in this competitive world. Today, decisions are made not only under uncertainty, with available and/or limited information, but may also be made in a virtual setting. Decision makers may not be engaged in face-to-face deliberations. Hence, understanding the challenges, complexity, and rewards of the use of technology, especially information technology in managerial decision-making, is important. Such an understanding is not only vital in determining the efficacy of managers and their organizations, but also significant in designing future management approaches and organizations. This is the core objective of this chapter.

Download Full-text