Outcomean

Outcomean is a term used in some areas of decision analysis to denote a summarized central tendency of potential outcomes that jointly accounts for outcome magnitudes and their likelihoods. It is formed as a portmanteau of 'outcome' and 'mean'. In its common formulation, outcomean is computed as the weighted sum sum_i p_i f(x_i), where x_i are the possible outcomes, p_i their probabilities, and f is a monotone transformation chosen to reflect a decision maker's risk preferences or utility calibration. If f is the identity function, outcomean reduces to the expected value. If f is concave, higher outcomes are dampened to emphasize risk aversion; if f is convex, it emphasizes upside potential or risk seeking.

Origin and usage: The term appears in a limited set of online decision-science discussions and is not part of a standardized methodological framework. It is sometimes discussed in relation to expected utility and risk-adjusted measures, but it is not widely adopted in formal journals, and definitions vary.

Example: Suppose x = {10, 0, 5} with p = {0.2, 0.5, 0.3}. Using f(x)=sqrt(x), outcomean = 0.2*sqrt(10) + 0.5*sqrt(0) + 0.3*sqrt(5) ≈ 1.303. For f identity, it equals 3.5, the EV.

Interpretation and limitations: Outcomean provides a flexible framework to encode risk attitude, but its value depends on the chosen f, and there is no universal standard. It may be less transparent to audiences unfamiliar with utility transformations.

See also: Expected value, Expected utility, Risk-adjusted performance, Utility function.