Exploring Relations between Decision Analysis and Game Theory

Many authors, including Cavusoglu and Raghunathan (2004) in this journal, have argued that proper modeling of the strategic interaction between players requires a game theoretic approach as opposed to a decision theoretic approach. We argue in this paper, however, that there are many environments in which decision analysis can deal with strategic interactions just as well and we present equivalence results for such environments. These equivalence results allow the prescriptive decision analyst to use the standard tools that a sound decision analysis requires, including decision trees and sensitivity analysis, even when confronted with strategic settings. We further present two technical comments on the Cavusoglu and Raghunathan paper. ∗We are grateful to Bob Clemen, Ralph Koijen, Casey Lichtendahl, and Canan Ulu for many helpful discussions and to Don N. Kleinmuntz (the editor) and three anonymous referees for helpful comments.