Information (EVPI) In decision-making under risk ‚ each state of nature is associated with probability of its occurrence ; If the decision-maker can acquire perfect (complete) information about the occurrence of various states of nature ‚ he will be able to select a strategy that yields the desired pay-off for whatever state of nature that actually occurs EMV /EOL criterion helps the decision-maker select a strategy that optimises the expected pay-off without complete information EVPI =Expected
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I. Background of the Case The case begins with Bob Guthrie‚ a retired physician and an avid skier‚ who realized that there was a need for a special ski helmet following the recent incidents that lead to serious head injuries for skiers. There were existing ski helmets in the market‚ but Bob believed that he had a chance to make helmets more appealing to the people‚ by adding new features. Bob took this idea as something that could not only be an outlet for his creativity‚ but as a way for him to
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Managerial Decision Modeling w/ Spreadsheets‚ 3e (Balakrishnan/Render/Stair) Chapter 8 Decision Analysis 8.1 Chapter Questions 1) Determining the best payoff for each alternative and choosing the alternative with the "best of the best" is the approach called: A) maximax B) maximin C) Laplace D) minimax regret E) expected monetary value Answer: A Page Ref: 323 Topic: Decision Making Under Uncertainty Difficulty: Moderate 2) Determining the worst payoff for each alternative and choosing
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Expected Monetary Value In a business environment‚ we frequently use probabilities to assess alternative financial decisions Example 1: A coin is tossed ten times. When a head is obtained‚ €4 is won. When a tail is obtained‚ €2 is lost Calculate the expected winnings. Outcome HEAD TAIL Winnings €4 -€2 Probability 0.5 0.5 Expected winnings in one toss: Expected Monetary Value (or just Expected Value (EV) = €1 Note: You never actually receive
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nothing $7.0 9.6 2.3 Market Conditions Unfavorable .65 -1.2 -3.5 0.7 a. Construct a decision tree for this problem. b. What is the recommended decision using the expected value criterion? c. Construct an Opportunity Loss table. What is the EOL decision? d. What is the maximum amount of money that the health food company is willing to pay for further information on market conditions? 3. Fenton and Farrah Friendly‚ husband and wife car dealers‚ are soon going to open a new dealership. They
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3 – Decision Analysis 1 Decision analysis is concerned with establishing systematic procedures for making decisions under uncertainty. Knowledge of decision analysis should help analyze a problem in a complicated and uncertain setting‚ to develop alternatives‚ and to identify possible outcomes. The decision maker then selects the alternative that best meets his or her objectives and psychological desires. Decision analysis is important because it provides decision makers with a rational way
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Decision Theory Models The Six Steps in Decision Theory * Clearly define the problem at hand. * List the possible alternatives. * Identify the possible outcomes or states of nature. * List the payoff or profit of each combination of alternatives and outcomes. * Select one of the mathematical decision theory models. * Apply the model and make your decision. Case Here we use the Thompson Lumber Company case as an example to illustrate these decision theory steps. John Thompson
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In a decision-making problem‚ anchoring effects occur when a seemingly trivial factor serves as a starting point for estimations In the following expression‚ which is (are) the dependent variable(s)? PROFIT = REVENUE – EXPENSES. Profit The categories of modeling techniques presented in this book include all of the following except: preventive models. Which of the following categories of modeling techniques includes optimization techniques? Prescriptive models What is the goal in optimization
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Chapter 13: Chi-Square Applications SHORT ANSWER 1. When samples of size n are drawn from a normal population‚ the chi-square distribution is the sampling distribution of = ____________________‚ where s2 and are the sample and population variances‚ respectively. ANS: PTS: 1 OBJ: Section 13.2 2. Find the chi-square value for each of the right-tail areas below‚ given that the degrees of freedom are 7: A) 0.95 ____________________ B) 0.01 ____________________ C) 0.025 ____________________
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Reviewer for MANSCIE 1. Introduction to Quantitative Analysis Approach Quantitative Analysis involves the use of mathematical equations or relationships in analyzing a particular problem. Steps in Quantitative Analysis Approach 1. Define the problem 2. Develop a model 3. Acquire input data 4. Develop a solution 5. Test the solution 6. Analyze the results 7. Implement the results 2. Decision Theory Six steps in decision making 1. Define the problem 2. List possible alternatives 3. Identify possible
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