Decision analysis model: An extension of the states of nature concept

The standard model of decision analysis is modified by showing that, in general, the state of nature concept can be usefully represented in terms of three components that may be called: (1) payoff relevant (2) payoff generating and (3) message generating. This modification allows a richer structure within which decision analysis problems can be formulated and thus allows a richer foundation for developing new concepts, classifying problems and revising existing concepts such as perfect information. It is shown that the unique payoff relevant domain of states and acts must, in any real decision, provide the initial basis for defining any payoff function (or, as appropriate, the loss function and opportunity loss function) that has a domain other than pay-off-relevant states.