1. The following payoff table shows profit for a decision analysis problem with two decision alternatives and three states of nature:
State of Nature
Decision Alternative S1 S2 S3
D1 250 100 25
D2 100 100 75
A. Construct a decision tree for this problem.
B. If the decision maker knows nothing about the probabilities of the three states of nature, what is the recommended decision using the optimistic, conservative and minimax regret approaches?
2. Suppose that a decision maker faced with four decision alternatives and four states of nature develops the following profit payoff table:
State of Nature
Decision Alternative S1 S2 S3 S4
D1 14 9 10 5
D2 11 10 8 7
D3 9 10 10 11
D4 8 10 11 13
A. If the decision maker knows nothing about the probabilities of the four states of nature, what is recommended decision using the optimistic, conservative and minimax regret approaches?
B. Which approach do you prefer? Explain. Is establishing the most appropriate approach before analyzing the problem important for the decision maker? Explain.
C. Assume that the payoff table provides cost rather than profit payoffs. What is the recommended decision using the optimistic, conservative and minimax regret approaches?
The solution is comprised of a detailed explanation of the various aspects of Decision Analysis. This step-by-step calculation of these complicated topics provides students with a clear perspective of Decision Tree, Optimistic Approach, Conservative Approach, Minimax Regret, Regret Matrix, Profit Payoff, Cost Payoff etc.
Linear Programming, Queueing Analysis, Simulations, Decision Analysis and Forecasting
A) What are 2 possible ways to improve the service rate of a waiting line operation?
B) Briefly describe how simulation could be used to assist decision makers in regards to new product development?
C) Give an example of how Decision analysis could be used to determine an optimal strategy? Briefly describe several decision alternatives a decision maker would be faced with and possible uncertain future events to consider.
D) What is the difference between quantitative forecasting methods and qualitative forecasting methods?
E) Under what circumstances would it be more appropriate to use quantitative rather than qualitative forecasting methods?
F) Give an example of a situation when using quantitative forecasting would be appropriate?View Full Posting Details