Modern Organizations and Decision Making Processes: A Heuristic Approach
This chapter explains a hybrid decision support system (HDSS) in which a heuristicdata mining procedure (a complement of a statistic data mining) is embedded into the original information system. For the better understanding of these concepts, these tools are presented as hybrid agents interacting in a financial environment. Structures and some important types of decisions that decision makers can adopt in a financial organization (e.g. a commercial bank) and how the suitable information is incorporated in a HDSS, are also discussed. IDEA GROUP PUBLISHING This chapter appears in the book, Computational Economics: A Perspective from Computational Intelligence edited by Shu Heng Chen, Lakhmi Jain Chung Ching Tai (c) 2006, Idea Group Inc. 701 E. Chocolate Avenue, Suite 200, Hershey PA 17033 1240, USA Tel: 717/533 8845; Fax 717/533 8661; URL http:/www.idea group.com ITB11869 218 Marostica Briano Copyright (c) 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. INTRODUCTION Thinking is usually mentioned as the main characteristic of the intelligence of human minds, and in a certain way, of computer programs, too. From a heuristic point of view, the complex architecture of the mind when thinking uses different types of processes (such as abduction, deduction, and induction) to solve problems and to make decisions. The main goal of this chapter is to explain a hybrid decision support system (HDSS) in which a heuristic data mining procedure is embedded into a common information system (DSS) For the better understanding of these concepts, these tools are presented as hybrid agents interaction in a financial environment (e.g. a commercial bank) This chapter is organized as follows. Section 2 explains a "decision" from a heuristic point of view. Section 3 discusses a hybrid decision support system (HDSS) Section 4 gives an illustration of decisions in a financial organization (e.g. a commercial bank) and Section 5 contains some concluding remarks and future work proposals. WHAT IS A DECISION? It is difficult in economic literature to find answers to direct questions such as "What is a decision in general?" Let us start with the definition found in Webster's Dictionary. There we find that a decision, among other meanings, is "a conclusion reached or given." Related to the specific meaning mentioned here, we can ask, "If a decision is a conclusion, which are the premises of this inference?" Suppes (1961) detailed on the types of premises of these decision related processes. He explained that in a decision situation, a person or group of persons (i.e. the decision makers) is faced with several alternative courses of actions but with incomplete information about the true state of affairs and the consequences of each possible action. The problem is how to choose an action that is optimal or rational, relative to the information available and according with some definite criteria of optimality or rationality. In Suppes' explanation, we have the main ingredients of what is called, in general terms, "decision theory." Because making decisions generally occurs in a context of uncertainty, the individual must choose between several alternatives. The possible decisions may have a variety of consequences, and ordinarily the consequences are not simply determined by the decision made but also affected by the present state of things. It is supposed that the individual or group of individuals has a utility function on the possible consequences and that the decision maker has a probability function (i.e. subjective probabilities) on the possible state of the environment that expresses his or her beliefs about the true state of things. According to the expected utility hypothesis, a decision maker tries to select, with a rational choice, a possible alternative that maximized the expected utility. However, there is evidence of paradoxical behavior that do not maximize the expected utilities. These are the main ingredients of a decision process or inference. Let us review briefly the concept of utility function related to consequences. Utility function is a numerical representation of some individual tastes and preferences. In modern times, after Pareto, utilities are considered as ordinal index of preferences (Silberberg, 1978) People are assumed to be able to rank all commodity bundles, without regarding the 9 more pages are available in the full version of this document, which may be purchased using the "Add to Cart" button on the product's webpage: www.igi global.com/chapter/modern organizations decisionmaking processes/6788?camid=4v1 This title is available in InfoSci Books, Business Intelligence, Business Technology Solution, InfoSci Business Technologies, Business, Administration, and Management, InfoSci Business. Recommend this product to your librarian: www.igi global.com/e resources/libraryrecommendation/?id=1