1887

n South African Journal of Industrial Engineering - The value of money and the flaw-of-averages

Volume 29 Number 2
  • ISSN : 1012-277X
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Abstract

Given the state of uncertainty in the world, decision analysis and decision-making under conditions of uncertainty are becoming more important. However, any rational decision-making requires a criterion on which to base the decision — which implies the availability of a value system. This paper will provide a short introduction to the basic principles of some value systems and related concepts such as the value of money, the flaw-of-averages, interest and discount rates, utility theory, and decision analysis. It will employ a Monte Carlo simulation approach to investigate the possible influence of the flaw-of-averages on interest calculations, net present value calculations, and decision trees. It will show that, under certain circumstances, the flaw-of-averages might be present and significant.

Besluitanalise en besluitneming onder toestande van onsekerheid word meer belangrik gegee die heersende toestand van onsekerheid in die wêreld. Enige rasionele besluitneming benodig ’n kriterium waarop die besluit gebasseer kan word. Dit impliseer die beskikbaarheid van ’n waardestelsel. Hierdie publikasie sal ’n kort inleiding verskaf tot die basiese beginsels van sommige waardestelsels en verbandhoudende konsepte soos die waarde van geld, die gemors-van-gemiddeldes, rente- en verdiskonteringskoerse, utiliteitsteorie, en besluitanalise. Dit sal gebruik maak van ’n Monte Carlo simulasie benadering om die moontlike invloed van die gemors-van-gemiddeldes op renteberekeninge, huidige waarde berekeninge, en besluitbome te ondersoek. Dit sal aantoon dat, onder sekere omstandighede, die gemors-van-gemiddeldes betekenisvol teenwoordig mag wees.

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/content/journal/10520/EJC-10ba2778d0
2018-08-31
2019-07-20

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