Decision analysis with fuzzy targets

Abstract

It is widely accepted that a common precept for the choice under uncertainty is to use the expected utility maximization principle, which was established axiomatically. Recently, a formal equivalence between this principle of choice and the target-based principle, that suggests that one should select an action which maximizes the (expected) probability of meeting a (probabilistic) uncertain target, has been established and extensively discussed. This chapter introduces the fuzzy target-based model for a class of decision making under uncertainty problems. Two methods for inducing utility functions from fuzzy targets are introduced, along with an interestingly established link between the decision maker's different attitudes about target and different risk attitudes in terms of utility functions. In addition, we also introduce how the fuzzy target-based approach can provide a unified way for solving the problem of fuzzy decision making with uncertainty about the state of nature and imprecision about payoffs. © 2008 Springer-Verlag Berlin Heidelberg.