In the previous article, I discussed risk profiling for reducing risks in decision making during uncertain times. A pay-off table is an excellent decision-making tool for that.
It’s great for:
- Two options decisions
- Multiple options decisions
- Daily life decisions
A pay-off table is a simple table that compares the events and results of your choices. Say you are inviting your friends to a barbeque party in your backyard, and the weather forecasts that it might rain. Now you should decide to continue with your plan or invite them inside the house and order pizza.
The table shows that you have four options.
- To hold an outdoor party. If it rains, this is not a good scenario as people will get wet, the barbeque will be called off, and you didn’t prepare other food.
- To hold the party indoors. If it rains, this is a good safe scenario, but you miss the barbeque.
- To hold an outdoor party. If it doesn’t rain, this is the perfect scenario.
- To hold an indoor party. It doesn’t rain—in this scenario, you will feel regret because you missed the beautiful weather and the barbeque.
A pay-off table can be useful for a simple decision; however, for a complex one, a decision tree might be more helpful.
I will discuss later in my future articles; many other decision-making tools that are useful in uncertain situations.