Beruflich Dokumente
Kultur Dokumente
Example:
What is 1x2x3x4x5x6x7x8 ? Left group
What is 8x7x6x5x4x3x2x1 ? Right group
Anchoring Effects:
Arise when trivial factors influence initial thinking about a
problem.
Decision-makers usually under-adjust from their initial anchor.
Framing Effect
Concluding Thoughts
We face numerous decisions in life & business.
Math Modeling is useful
We need clear definition of the problem,
Assumptions
Variables
Objective
A variety of alternative solutions
Brute force/graphical/analytical/simulation
While brute force or graphical methods may be easy to
implement, they may not always lead to the optimal
solutions effectively
computers and spreadsheets can help todays managers.
Psychology may affect the outcome
Chapter 14
Introduction to Decision Analysis
Models help managers gain insight and understanding, but they
cant make decisions.
Decision making often remains a difficult task due to:
Uncertainty regarding the future
Conflicting values or objectives
Consider the following example...
Probabilistic Methods
At times, states of nature can be assigned probabilities
representing their likelihood of occurrence.
For decision problems that occur more than once, we can often
estimate these probabilities from historical data.
In these cases, subjective probabilities are often assigned based
on interviews with one or more domain experts.
Interviewing techniques exist for soliciting probability estimates
that are reasonably accurate and free of the unconscious biases
that may impact an experts opinions.
Decision Trees
A decision tree is a chronological representation of the decision
problem.
Each decision tree has two types of nodes; round nodes
correspond to the states of nature while square nodes
correspond to the decision alternatives.
The branches leaving each round node represent the different
states of nature while the branches leaving each square node
represent the different decision alternatives.
At the end of each limb of a tree are the payoffs attained from
the series of branches making up that limb.
Sensitivity Analysis
Sensitivity analysis can be used to determine how changes to
the following inputs affect the recommended decision
alternative:
probabilities for the states of nature
values of the payoffs
If a small change in the value of one of the inputs causes a
change in the recommended decision alternative, extra effort
and care should be taken in estimating the input value.
Utility Theory
Sometimes the decision with the highest EMV is not the most
desired or most preferred alternative.