Knowledge-based decision support, preferences, and financial planning

Knowledge-based decision support for complex decision problems in a changing environment is discussed. The problems involve a sequence of decisions and require dynamic modifications of the representation. Decision making is modeled by means of a Negoplan system. Negoplan is based on a two-level rule formalism with logical variables and unification. The existence of multiple solutions of the problem is assumed. This allows the concept of flexibility and a mechanism of preferences to be introduced. Flexibility makes it possible to determine decisions which are resistant to unforeseen changes of the environment. Preferences facilitate the search for flexible decision characteristics. Negoplan can be applied in many types of decision problems. Modeling a class of financial decisions is considered. A theoretical model of capital budgeting is described and an implementation of this in Negoplan is presented. It is shown how preferences and flexibility can be mutually linked in the knowledge-rich modeling of financial management problems