This website uses cookies to ensure you have the best experience. Learn more

Decision Analysis

2671 words - 11 pages

Decision Analysis: Decision analysis is a set of quantitative decision making techniques for decision situations in which uncertainty exists.

Now, uncertainty can be classified into two ways/ types:

1. Subjective Probability: Subjective probability is the degree of belief to occurrence of the event.

2. Objective Probability: Objective probability is the probability which can be derived either based on historical occurrences or based on experimentation. Alternatively can be derived from statistical formula.

Consistency requirement: If the probability of an event A is 0.65, then the probability of event B must be 0.35.

i.e. P(A) + P(B) = 1

Mathematically, if A, B ...view middle of the document...

Let’s say that you have $ 1000 to invest for a one year period. One alternative is to open a savings account paying 6% interest and another is to invest in a government treasury bond paying 10% interest. Both investment are secure and guaranteed, but as treasury bond will pay a higher return, you may choose that one.

Type 2: Decision Making Under Risk: In decision making under risk, the decision maker knows the probability of occurrence of each outcome. For example, that the probability of being dealt a club is 0.25. The probability of rolling a 5 on a die is 1/6. In decision making under risk, the decision maker attempts to maximize his or her expected well-being. Decision theory models for business problems in this environment typically employ two equivalent criteria: maximization of expected monetary value and minimization of expected loss.

Type 3: Decision Making Under Uncertainty: In decision making under uncertainty the decision maker does not know the probabilities of the various outcomes. As an example, the probability that a BNP personnel will be president of Bangladesh 25 years from now is not known. Sometimes it is impossible to assess the probability of success of a new undertaking or product.

Decision Making Under Risk

Decision making under risk is a probabilistic decision situation. Several possible states of nature may occur, each with a given probability.

There are three types of methods or criteria available, which could be of help to the decision maker.

1. Expected Monetary Value: EMV is the weighted sum of possible payoffs for each alternative.

i.e. EMV (alternative i ) = (Payoff of first state of nature) x ( Probability of first state of nature)
+(Payoff of second state of nature)x(Probability of second state of nature)
+ …. + (Payoff of last state of nature)x(Probability of last state of nature).

Example: 1 Mc Douglas a national chain fast food restaurant, has been offering a traditional selection of hamburgers, French fries, soft drinks etc. The company want to introduce breakfast items to the menu.

Breakfast items are relatively easy to prepare and would not require a large capital outlay for additional cooking equipment. Most important such items would be sold in the morning when the demand for the company’s traditional products has been very week. However, because
a. Many people are known to skip breakfast and
b. The company does not know how competitors may react, the demand for the new products is uncertain.

So, they consider three levels of customer demand- strong, average and weak.
There are two alternative acts available to Mc Douglas

A1 : Introduce breakfast items.
A2 : Do not introduce breakfast items.
And three possible states of nature

S1 : Strong demand
S2 : Average demand

Other Papers Like Decision Analysis

Individual Ethical Decision-Making Analysis Introduction Throughout My Lifetime I Have Dealt With Everything From Priests To Murderers, I Have Witnessed Preachers With No Morals And Thieves With Moral...

732 words - 3 pages Letter to a Philosopher Elbert Avery PHI/105 Nov, 06, 2013 Letter to a Philosopher I am writing this letter to John Dewey regarding his theory of pragmatism. I am choosing this theory because it interests me in the scientific aspect of your thinking. I know that you chose to challenge logicians to answer the question of truth. This is a hard thing to sort out and make real and true. Going up against some of the times most logical thinkers

Decision Support Essay

1971 words - 8 pages . References Edwards, J. S., Duan, Y., & Robins, P. C. (2000). An analysis of expert systems for business decision making at different levels and in different roles. European Journal of Information Systems, 9(1). Retrieved from WaldenUniversity databases . Fazlollahi, B., & Vahidov, R. (2001). A method for generation of alternatives by decision support systems. Journal of Management Information Systems, 18(2). Retrieved from WaldenUniversity

Decision Making

2032 words - 9 pages . Analytic Hierarchy Process AHP is a robust and flexible multi-criteria decision analysis methodology. This method can be used to objectively assign weights to factors and sub-factors in a decision problem. The decision problem is represented in a hierarchical tree structure. Elements at the same level are of equal magnitude and can be related to elements at the next higher level. The top level denotes overall risk; the medium level indicates risk

Decision Making

3959 words - 16 pages understand the scheme behind the entire product or service offered by the competitor, like * What is their approach? * What is their pricing? * What is their advantage? * What is their value? * Do they have large investors? Carry out a SWOT analysis of our business, with which our business strength, weaknesses & opportunities can be identified. Put emphasis on developing adequate strategies for dealing with threats and try to

Merck Decision Tree

354 words - 2 pages Effective #NAME? -$200,000,000.00 #NAME? 85.0% -250,000,000 #NAME? #NAME? Test Not Effective 10.0% 0 Phase III: Long Term Efficacy Testing #NAME? 15.0% 0 #NAME? #NAME? Depression Don't Test #NAME? -$40,000,000.00 Indications #NAME? #NAME? 0 #NAME? #NAME? Test Effective #NAME? -$150,000,000.00 #NAME? 75.0% -100,000,000 #NAME? #NAME? Test Merck Decision Tree Although a decision analysis would

Mgt/230 Decision Making Process

1076 words - 5 pages drawbacks of their options. Based on the consumer’s analysis the best solution to maximize the outcome of the problem is typically chosen. Ted and his wife proceed to make an appointment and meet with a sales representative at the chosen dealership. They engage in discussions about the price of the vehicle, loan amount, down payment and monthly installments. This point of the process is the implementing of the decision which is the fourth stage

Managing Financial Resources And Decision

8440 words - 34 pages THE LONDON COLLEGE UCK HND IN BUSINESS HNBS 102 MANAGING FINANCIAL RESOURCES AND DECISION TASK 1) General information about the company: - the full name of the company: the restaurant "Millennium"; - the legal form of the company: general partnership;( being in a partnership the company has more chance to be successful not only cause more capital is injecting to the business but also

Understanding The Dilemman Of Ethical Decision Making

6423 words - 26 pages analysis is helpful in training and development, and is essential in strategic planning and decision-making. Some impacts might seem small, but if the size of the stakeholder group is very large then the overall impact might be considerable. By accepting that stakeholders are represented by a far wider range of people and groups than conventionally applied, we effectively expand the appreciation of what organizational, leadership and management

Operations Decision"

424 words - 2 pages Assignment 2 "Operations Decision"  Assume you have been hired as a managing consultant by a company to offer some advice that will help it make a decision as to whether it should shut down completely or continue its operations. It currently uses 100 workers to produce 6,000 units of output per month (working 20 days / month). The daily wage (per worker) is $70, and the price of the firm's output is $32. The cost of other variable inputs is

Decision Making

1244 words - 5 pages For this paper, I have chosen chapter 7 (Decision Making and Creativity) and to use key concepts from this chapter to explain a project which I was responsible for at work and how the outcome could have been executed with the use of these key concepts that I will discuss. The chapter’s definition of decision making is “the conscious process of making choices among alternatives with the intention of moving toward some desired state of affairs

Ethical Decision

808 words - 4 pages harassed in the future by the CEO. * Option 3: Jill can refuse to review Henry, based on the fact that she can’t be objective * Consequence: Henry’s father could lose trust in Jill as an advisor * Consequence: Henry’s father could further inquire as to why Jill is unable to give an unbiased review of his son, Henry What I would do The decision on the ethical dilemma could be resolved by applying these three ethical theories: The

Related Essays

Decision Analysis

1316 words - 6 pages Prof. John Wetherell Decision Analysis July 2016 Prof. John Wetherell Decision Analysis July 2016 DA Case Study 4 Chosen market to expand into: Computer Tablets Companies chosen and their current share in the market (2015): Samsung 13.7% Huawei 3.4% Sony < 3% In the growing world of technology, tablets are one of the most common devices being used nowadays, it’s difficult for companies to expand into new markets because of

Decision Analysis Task 1

1507 words - 7 pages JGT2 Decision Analysis Task 1 A.) Recommendation on how to improve current workflow. It is my recommendation that Shuzworld change their facilities layout to create a better workflow. You can accomplish this by breaking the current structure and reorganizing the workstations to accomplish tasks in a more time efficient manner and maximizing an employees’ time spent on the product. Utilizing the Case Study we can surmise that each eight

Decision Making And Data Analysis

555 words - 3 pages preliminary testing does not give absolute certainty that the invention will have commercial potential. If Campus bought the invention it would still need to go through the whole process of exploring the commercial potential and developing the invention as described and costed earlier. Campus Crucible must decide whether to conduct the preliminary testing, and indeed whether to buy the invention at all. Draw a decision tree to represent the problem and indicate what Campus should do if their objective is to maximise expected value. You may disregard taxes, inflation and the time value of money.

1. Perform A Quantitative Insourcing/Outsourcing Analysis Using The Data Provided. What Qualitative Issues Might Affect Your Final Decision? Identify Any Costs Or Issues That Are Not Part Of Your...

4548 words - 19 pages capacity to satisfy FlexCon's total piston requirements. Appendix 3 provides a worksheet to help in the insourcing/outsourcing cost analysis. CASE DISCUSSION 1. Perform a quantitative insourcing/outsourcing analysis using the data provided. What qualitative issues might affect your final decision? Identify any costs or issues that are not part of your analysis that might affect your decision. What is your recommendation regarding