Problem Session 6 - DA Cycle and Tools

# Problem Session 6 - DA Cycle and Tools - MS&E 352 Decision...

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MS&E 352 Decision Analysis II Problem Session 6

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On our agenda for today… DA Cycle and Tools Value Models Waterfall Diagrams Tornado Diagrams Tom. W Homework & Case Study Questions
DA Cycle and Tools

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Decision Analysis Cycle & Tools Deterministic Analysis Probabilistic Analysis Appraisal Structure Force Field Diagrams & Issue Raising Decision Hierarchy Strategy Tables Decision Diagrams Spreadsheet Model 1997 NPV 1 2 3 4 1998 1998 Sensitivity to Range Decision Trees Probability Distributions and Dominance High-Base-Low of Probability distributions Alt 1 Alt 2 Alt 3 Sensitivity Analysis Value of  Information Decision Quality Value of  Control p 1-p 1 0 Deterministic Sensitivity F ormulate E valuate A ppraise D ecide
Once you have structured the problem, you can build a value model for the analysis. Large Instrument Manufacturer's Value Model Section 1 - Strategy Selection Strategy 1 strategy 3 Strategy Name Continue Present Arrangement strategy_name Section 2 - Constants Description Units Value Name Model-related constants Utilitarian constants Section 3 - Uncertainties Description Units Index In Use Name Low Base High Revenue uncertainties #VALUE! Number of machines sold units 2 30 nb_mach_sold 25 30 50 Repair costs uncertainties Avr repair cost, alpha failure \$ thousand 2 10.0 avr_rep_cost_a 9.0 10.0 11.0 Avr repair cost, beta failure \$ thousand 2 8.0 avr_rep_cost_b 7.8 8.0 8.1 Alpha failures per year fract of machines 2 0.15 a_failures_yr 0.13 0.15 0.17 Beta failures per year fract of machines 2 0.70 b_failures_yr 0.68 0.70 0.72 Training costs uncertainties Training cost per machine \$ thousand 2 8.0 training_cost 4.0 8.0 10.0 Section 4 - Calculations NPV (\$ thous) -104.74 Year 2003 2004 2005 2006 2007 Period 0 1 2 3 4 Sales and production & marketing costs Repair costs Alpha failures repair cost \$ thousand 45.00 45.00 45.00 45.00 45.00 Beta failures repair cost \$ thousand 168.00 168.00 168.00 168.00 168.00

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## This note was uploaded on 06/16/2010 for the course MS&E 352 taught by Professor Ronhoward during the Winter '09 term at Stanford.

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Problem Session 6 - DA Cycle and Tools - MS&E 352 Decision...

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