What is the difference between sensitivity analysis and uncertainty analysis?
An example of an AI chatbot conversation about sensitivity vs uncertainty analysis in decision-making.
What is the difference between sensitivity analysis and uncertainty analysis?
Sensitivity analysis examines how the variation in output can be attributed to changes in input parameters, while uncertainty analysis assesses the impact of uncertainty in input values on the output.
Can you give me an example of each?
Sure! In sensitivity analysis, you might change the discount rate in a financial model to see how it affects net present value. In uncertainty analysis, you might use probability distributions for input variables to understand the range of possible outcomes.
When should I use one over the other?
Use sensitivity analysis when you want to identify which inputs have the most influence on your results. Use uncertainty analysis when you need to understand the overall risk and variability in your outcomes.
Are there any tools that can help with these analyses?
Yes, there are several tools available, such as @Risk for uncertainty analysis and Excel's built-in data tables for sensitivity analysis.
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