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DECISION ANALYSIS Chapter 4

DECISION FORMULATIONI nfluence DiagramsPayoff TablesDecision MAKING WITHOUT PROBABILITIESO ptimistic ApproachConservative ApproachMinimax Regret MAKING WITH PROBABILITIESE xpected 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 PROBABILITIESD ecision 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.

3) and the strong demand state of nature (s 1) occurs. Similarly, V 32 9 indicates a loss of $9 million if the de-cision is to build a large complex (d 3) and the weak demand state of nature (s 2) occurs. Decision Trees Adecision tree provides a graphical representation of the decision-making process. Figure 4 ...

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