THE VALUE OF MONEY AND THE FLAW-OF-AVERAGES
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...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Stellenbosch University
2018-08-01
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| Series: | South African Journal of Industrial Engineering |
| Subjects: | |
| Online Access: | http://sajie.journals.ac.za/pub/article/view/1968 |
| _version_ | 1818026632521187328 |
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| author | Kruger, Paul Yadavalli, Sarma |
| author_facet | Kruger, Paul Yadavalli, Sarma |
| author_sort | Kruger, Paul |
| collection | DOAJ |
| description | 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. |
| first_indexed | 2024-12-10T04:35:05Z |
| format | Article |
| id | doaj.art-425ea1710a59435196deb0ee27656b12 |
| institution | Directory Open Access Journal |
| issn | 1012-277X 2224-7890 |
| language | English |
| last_indexed | 2024-12-10T04:35:05Z |
| publishDate | 2018-08-01 |
| publisher | Stellenbosch University |
| record_format | Article |
| series | South African Journal of Industrial Engineering |
| spelling | doaj.art-425ea1710a59435196deb0ee27656b122022-12-22T02:02:02ZengStellenbosch UniversitySouth African Journal of Industrial Engineering1012-277X2224-78902018-08-0129211510.7166/29-2-1968THE VALUE OF MONEY AND THE FLAW-OF-AVERAGESKruger, Paul 0Yadavalli, Sarma1University of Pretoria, South AfricaUniversity of Pretoria, South AfricaGiven 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.http://sajie.journals.ac.za/pub/article/view/1968value of moneyinterest and discount ratesutility theoryflaw-of-averages |
| spellingShingle | Kruger, Paul Yadavalli, Sarma THE VALUE OF MONEY AND THE FLAW-OF-AVERAGES South African Journal of Industrial Engineering value of money interest and discount rates utility theory flaw-of-averages |
| title | THE VALUE OF MONEY AND THE FLAW-OF-AVERAGES |
| title_full | THE VALUE OF MONEY AND THE FLAW-OF-AVERAGES |
| title_fullStr | THE VALUE OF MONEY AND THE FLAW-OF-AVERAGES |
| title_full_unstemmed | THE VALUE OF MONEY AND THE FLAW-OF-AVERAGES |
| title_short | THE VALUE OF MONEY AND THE FLAW-OF-AVERAGES |
| title_sort | value of money and the flaw of averages |
| topic | value of money interest and discount rates utility theory flaw-of-averages |
| url | http://sajie.journals.ac.za/pub/article/view/1968 |
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