Problem_Session_2

Problem_Session_2 - MS&E 252 Decision Analysis I...

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Decision Analysis I Problem Session 2 Oct. 9 th , 2007
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Coursework.stanford.edu mojel@stanford.edu Office hours:   Mon, 5:45pm – 6:45pm Tue, 3pm – 4pm Terman 406A Contacting me
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What we will cover today: DA cycle Distinctions Name Kind, degree Clear, observable,  useful Expert Decision basis Alternatives Information Preferences Personal indifferent  buying and selling  prices Sunk cost Certain equivalent Value of clairvoyance Cycle of ownership
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The Decision Analysis Cycle Deterministic Analysis Probabilistic Analysis Appraisal Structure Initial Situation D ecision Iteration F ormulation E valuation A ppraisal Refer to the reading: The Evolution of Decision Analysis Compare to : Decision Analysis- Applied Decision Theory
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Decision makers face two different tasks Making Strategic Decisions Managing Operations “Choosing which mountain to climb” “Climbing the chosen mountain in the best possible way”
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DA cycle Distinctions Name Kind, degree Clear, observable,  useful Expert Decision basis Alternatives Information Preferences Personal indifferent  buying and selling  prices Sunk cost Certain equivalent Value of clairvoyance Cycle of ownership What we will cover today:
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Important distinctions about distinctions? You can have different   kinds   of  distinctions, i.e. different ways to split  the same group We call the smaller groups the   degrees   of the distinction. A Distinction is a thought that splits a big group into two or more little groups.
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We call a distinction  clear   if it passes  the  clarity test , i.e. if the  clairvoyant   can tell which degree has occurred. If you can tell which degree of the  distinction has occurred, we call it an   observable   distinction. If the distinction helps you in thinking  about a decision situation, we call it a   useful   distinction. Important distinctions about distinctions?
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Important distinctions about distinctions? Mutually exclusive   at most one can occur. Collectively exhaustive   at least one must occur. Mutually exclusive  and   collectively exhaustive exactly one must occur.
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The degrees of a distinction must be mutually exclusive  and collectively exhaustive . Think about the temperature outside. .. Under 10°C, over 20°C Under 20°C, over 10°C Under 20°C, over 20°C Under 20°C, over 20°C, at 20°C Example Degrees of Distinctions
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Uses  powerful distinctions   (glossary) Knows the  relationships  between distinctions Has particular  skills   (sometimes) Has  sense of history
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Problem_Session_2 - MS&E 252 Decision Analysis I...

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