Risk and Decision Analysis in Projects, 3.1 Edition

Revisions and Errata

First printing release date: August 30, 2018. The e-book edition is an electronic, full-page duplicate.

The Kindle edition does not have the back cover. Most of the back cover is a quick index to key topics. Here is a pdf file with that index: Back Cover Index


Thanks to Bryn Stevens, PreProject Project Forecasting, South Australia, for his careful reading. Bryn reported several typos and, more importantly, inconsistencies in labeling concave and convex utility functions.

Simple typos:
Chapter 10, p154. The 4th line up from the bottom should read, "... probability that not E occurs." (the "not bar" over E is missing).
Chapter 10, p160. The 3rd line down from the top should read," P(ABC …) = P(A) x P(B) x P(C) x ..."
Chapter 10, p163. There should be a Not A symbol above the table right column.

Concave vs. Convex utility functions. I've been inconsistent over my career, and this manifested in the book. Sorry about that. Whether the curve is concave or convex depends upon whether viewing from above or below. Google: "A concave function is also synonymously called concave downwards, concave down, convex upwards, convex cap or upper convex." How confusing is this?!

The book and I now align with the most-common mathematics function convention, as illustrated and explained on page 98:
  General, for any line connecting two points on the function:
   If the curve connecting the points is everywhere above the line, the function is convex.
   If the curve connecting the points is everywhere below the line, the function is concave.

   For functions that are twice differentiable and have no straight line segments:
    Strictly convex functions have increasing slope everywhere (i.e., the second derivative is positive, and the function is accelerating upward.
    Strictly concave functions have decreasing slope everywhere (i.e., the second derivative is negative, and the function is accelerating downward).

Concave vs convex curve shapes

Here are the associated revisions:

Page 97, the figure caption should read, "Typical survey utility function for modest amounts. Concave for positive outcomes ($x) is risk-averse (risk-avoiding). Convex for negative outcomes is risk-seeking. Note that for a coin flip experiment, the utility of $100 (20.6 utils) is about twice the magnitude of the utility of -$50 (-10.3 utils). Often, in contrast, a person or organization is conservative everywhere, and there is a sharp elbow at $0."

Page 99, the figure caption. The last line should read, "The concave upper curve indicates risk aversion (conservative). A straight line is risk-neutral. The convex lower curve represents a risk-seeking attitude."
Page 99, below the figure caption. The second sentence should read, "A convex curve would represent risk-seeking behavior."
Page 100 in the figure caption, reworded to: "As expected, the curve is concave, representing a risk-averse ..."
Page 118, question 3, reworded to: "What does a convex utility curve (accelerating upward) represent?"

Please contact me if you have questions or concerns about anything you read in the book. E-mail: john1@maxvalue.com

Copyright (C) 2018-2020 by John R. Schuyler.  Last updated 22-Jan-2020.