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# Plan evaluation

Plan evaluation uses decision science to evaluate the decision options in your Plan.

When you run Plan evaluation the decision option path with the highest evaluation is shown in blue.

Note: During evaluation, Plan editing features are limited. To resume editing your Plan click the "Exit evaluation" button.

## The science behind Plan evaluation

Plan evaluation is based on the standard economic model of rational decision making, which when applied to risky decisions is known as VNM utility theory.

VNM utility theory provides a robust scientific basis for identifying the relative values a rational decision maker will ascribe to alternative options for risky decisions.

Prenario uses VNM utility theory to evaluate the decision options in a Plan by taking into account all the user inputted features of a Plan, including cards, results, probabilities and risk profiles.

To be considered "rational" under VNM utility theory, all a decision maker needs to do is accept 4 basic assumptions of rationality. If the decision maker accepts these assumptions, their preferences will scientifically align with VNM utility theory (and Prenario's Plan evaluation).

The 4 assumptions of VNM utility theory involve basic comparisons between hypothetical chance/event cards A, B and C as follows.

### 1. Completeness assumption

It is assumed that a decision maker either prefers A over B, prefers B over A, or is indifferent between A and B.

This assumption will hold if a decision maker is able to state a definite preference when comparing any 2 chance/event cards.

### 2. Transitivity assumption

If a decision maker prefers A over B, and B over C, it is assumed that the decision maker will prefer A over C.

This assumption will hold if a decision maker has mutually-consistent preferences for any 3 chance/event cards.

### 3. Independence assumption

If a decision maker prefers A over B, it is assumed the decision maker will prefer a chance between A and C, over the same chance between B and C.

This assumption will hold if a decision maker's preference between any 2 chance/event cards is the same as their preference between a chance between those 2 chance/event cards combined with any third chance/event card.

### 4. Continuity assumption

If a decision maker ranks A, B, C in that order from most to least preferred, it is assumed the decision maker will be willing to substitute B for a chance between getting either A or C so long as the chance of getting A high enough.

This assumption will hold if a decision maker is able to select a risk profile in Prenario.