Transcription of DECISION ANALYSIS Chapter 4 - swlearning.com
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DECISION ANALYSIS Chapter 4 - swlearning.com
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. 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.
approaches sometimes lead to different decision recommendations, the decision maker needs to understand the approaches available and then select the specific approach that, ac-cording to the decision maker’s judgment, is the most appropriate. Optimistic Approach The optimistic approachevaluates each decision alternative in terms of the best ...
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