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Problem_Session_7_-_DA_Cycle_and_Tools_2

Problem_Session_7_-_DA_Cycle_and_Tools_2 - MS&E 352...

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MS&E 352 Decision Analysis II Problem Session 7
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On our agenda for today… DA Cycle and Tools Probabilistic Analysis Appraisal Homework & Case Study Questions
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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
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The CDF of the NPV contains all the information the Decision-Maker needs!
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However, the CDF is too much information to be processed by the human brain… Compare A and B based on this simplified picture; show the 10-50-90 points as well as the CE of each alternative. Value ($ million) -$50 $0 $50 $100 $150 $200 $250 Alternative A 10 56 128 62 Alternative B -35 58 201 63 Alternative C 4 33 67 40 Alternative C 6 56 78 51 = Certain Equivalent
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Another way to summarize the information contained in the CDF is to study dominance. Deterministic Dominance Any person who prefers more money to less prefers A to B. th 0 th percentile 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% -20 -10 0 10 20 30 40 50 Strategy A Strategy B
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Another way to summarize the information contained in the CDF is to study dominance.
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