Decision theory is a principle associated with decisions. The theory is an interdisciplinary approach to determine how decisions are made given unknown variables and an uncertain decision environment framework. Generally, the theory provides a formal structure to make rational choices in the situation of uncertainty. In addition, it helps in analyzing the decision-making process of the economic agents along the value chain. Given a set of alternatives, a set of consequences, and a correspondence between those sets, decision theory offers conceptually simple procedures for choice. More specifically, decision theory deals with methods for determining the optimal course of action when a number of alternatives are available and their consequences cannot be forecasted with certainty (Parmigiani et al, 2009).In this study, potato smallholder farmers faces uncertainty condition that dictates them how much risk can take and which risk management strategy they should employ the specified amount of risk.