Lecture 3 - Decision Theory The Decision Process Specify...

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Decision Theory The Decision Process Specify objectives and criteria for making decisions Develop alternatives Analyze and compare alternatives Select the best alternative Implement the chosen alternative Monitor the results to ensure that desired results are achieved Causes of Poor Decisions Mistakes in the decision process Bounded rationality Suboptimization Decision Environments Certainty Risk Uncertainty Decision Theory – represents a general approach to decision making and suitable for a wide range of operations management decision (e.g. capacity planning, product and service design, equipment selection, and location planning) Decision Theory is suitable for decisions characterized by: 1) a set of future conditions exists that will have a bearing on the result of the decision 2) a list of alternatives for the managers to choose from 3) a known payoff for each alternative under each possible future condition To use this approach (Decision Theory), the manager must:
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This note was uploaded on 04/03/2012 for the course BAIT 386 taught by Professor Avi-itzchak during the Spring '12 term at Rutgers.

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Lecture 3 - Decision Theory The Decision Process Specify...

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