Chapter05s - MSB 354 5S Decision Theory 5S-1 Learning Objectives Describe the decision environments under which operations decisions are made

Info iconThis preview shows pages 1–11. Sign up to view the full content.

View Full Document Right Arrow Icon
MSB 354 5S Decision Theory 5S-1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
5S-2 Learning Objectives Describe the decision environments under which operations decisions are made Describe and use techniques that apply decision making theory under uncertainty and risk Describe and use the expected-value approach Construct a decision tree and use it to analyze a problem Compute the expected value of perfect information Conduct sensitivity analysis on a simple decision problem
Background image of page 2
5S-3 A general approach to decision making which is suitable for a wide range of operations management decisions, including: Product and service design Equipment selection Location planning Capacity planning Decision Theory
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
5S-4 A set of possible future conditions exists that will have a bearing on the results of the decision A list of alternatives for the manager to choose from A known payoff for each alternative under each possible future condition Decision Theory Elements
Background image of page 4
5S-5 Identify possible future conditions called “ states of nature” Develop a list of possible alternatives. one of which may be to “do nothing” Determine or estimate the “payoff associated with each alternative for every future condition If possible, determine the “likelihood “of each possible future condition Evaluate alternatives* according to some “ decision criterion” and select the best alternative * Evaluation of alternative differs according to the degree of certainty Decision Theory Process
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Example Payoff Table shows expected payoffs for each alternative under possible states of nature 5S-6
Background image of page 6
5S-7 “Bounded Rationality” Combination of mistakes in the decision process The inherent limitations imposed on decision making caused by costs, human abilities, time, technology, and availability of information Causes of Poor Decisions
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
5S-8 Sub-optimization” The result of different departments each attempting to reach a solution that is optimum for that department Causes of Poor Decision(con,)
Background image of page 8
5S-9 Decision Process 1. Identify the problem 2. Specify objectives and criteria for a solution 3. Develop suitable alternatives 4. Analyze and compare alternatives 5. Select the best alternative 6. Implement the solution 7. Monitor to see that the desired result is achieved
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Certainty : Environment in which relevant parameters have known values Risk : Environment in which certain future events have probabilistic outcomes Uncertainty : Environment in which it is impossible to assess the likelihood of various future events
Background image of page 10
Image of page 11
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 12/06/2011 for the course MSB 354 taught by Professor Nam during the Fall '11 term at Korea Advanced Institute of Science and Technology.

Page1 / 32

Chapter05s - MSB 354 5S Decision Theory 5S-1 Learning Objectives Describe the decision environments under which operations decisions are made

This preview shows document pages 1 - 11. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online