Decision Theory: Its Value in the Small Business

Abstract

Decision theory analysis and a more conventional managerial approach were used in parallel to help solve a retailer's product-line problem. This paper evaluates both methods, comparing their costs and benefits in light of actual sales results. Decision theory was clearly a more consistent information processor but tended to obscure some important qualitative issues. Conventional techniques thus provided behavioral insights about factors contributing to product demand, while decision theory revitalized management's approach to certain fundamental issues in problem-solving.