DECISION ANALYSIS Chapter 4 - swlearning.com

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DECISION FORMULATIONInfluence DiagramsPayoff TablesDecision MAKING WITHOUT PROBABILITIESOptimistic ApproachConservative ApproachMinimax Regret MAKING WITH PROBABILITIESExpected Value of Perfect ANALYSIS AND SENSITIVITY ANALYSISRisk AnalysisSensitivity ANALYSIS WITH SAMPLE INFORMATIONAn Influence DiagramA DECISION TreeDecision StrategyRisk ProfileExpected Value of Sample InformationEfficiency of Sample BRANCH PROBABILITIESDecision ANALYSIS can be used to determine an optimal strategy when a de-cision maker is faced with several DECISION alternatives and an uncertain orrisk-filled pattern of future events. For example, a global manufacturermight be interested in determining the best location for a new plant. Sup-pose that the manufacturer has identified five DECISION alternatives corre-sponding to five plant locations in different countries. Making the plantlocation DECISION is complicated by factors such as the world economy, de-mand in various regions of the world, labor availability, raw material costs,transportation costs, and so on.

includes risk analysis. Through risk analysis the decision maker is provided with probabil-ity information about the favorable as well as the unfavorable consequences that may occur. We begin the study of decision analysis by considering problems having reasonably few decision alternatives and reasonably few possible future events.

  Analysis, Decision, Decision analysis, Probabil, Prob ability