Which of the following is not a step in decision theory? a. determination of the pay-off function which describes consequencesb. forming an economic framework analysisc. identification of the various possible outcomesd. choosing from among the various alternatives

b. forming an economic framework analysis

Explanation:

Decision theory is also known as decision analysis. It is a means to determine the optimal strategy to take in situations where decision makers are faced with multiple alternatives and future events that are risky or uncertain.

These situations are characterized by having two or more courses of action that are available that the decision maker has to choose from.

According to Vohra (2010) in Quantitative Techniques in Management, the decision making process involves the following steps:

1. Identifying the various possible outcomes (states of nature or events) for the decision problem. These events/states of nature are out of the control of the decision maker

2. Identifying the courses of action or strategies that are available to the decision-maker. The choice of these is under the control of the decision maker.

3. Determining the pay-off function which describes the resulting consequences from the combination of different actions and events.

4. Finally, choosing from the various alternatives depending on certain criteria; these may include information included in step (3) alone or may require and include other additional information.

This is known as decision making under uncertainty (uncertain conditions). Evidently, forming an economic framework for analysis is not part of this particular process.