Possibility and cost in decision analysis

The thesis of this paper is that a practically relevant decision theory must be based on the concept of possibility. As the concept is interpreted here it covers all the obstacles the decision-maker is facing. In many situations the contemplation of possibility is quite as relevant as the usual concentration on utility and probability. There is a traditional economic concept which conforms to an emphasis on obstacles or possibility in decision-making: opportunity cost. The opportunity cost of a decision is the value of the highest valued possible decision which is inhibited as a result of the decision actually taken. However as opportunity cost is usually interpreted decisions are dichotomized as either possible or impossible to perform. It is argued in the paper that this dichotomization is not very realistic. In reality there must be allowed for a continuum of states between the plain impossibility and the complete possibility. This gradual view of possibility could be dealt with if the fuzzy set theory is used. In the paper it is shown how some relevant concepts regarding possibility could be based on fuzziness and how these concepts could be used to analyze practical situations. A method to deal simultaneously with possibility and probability is stated.