THE VALUE OF MONEY AND THE FLAW-OF-AVERAGES

Authors

  • Paul Kruger Founding Editor of SAJIE, University of Pretoria
  • Sarma Yadavalli University of Pretoria

DOI:

https://doi.org/10.7166/29-2-1968

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.

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Published

2018-08-31

How to Cite

Kruger, P., & Yadavalli, S. (2018). THE VALUE OF MONEY AND THE FLAW-OF-AVERAGES. The South African Journal of Industrial Engineering, 29(2), 1–15. https://doi.org/10.7166/29-2-1968

Issue

Vol. 29 No. 2 (2018)

Section

Feature Articles

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