Slide-Chapter-3-QM.pdf - Semester 01 Academic Year 2019...

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Quantitative Methods for Business (BA1681U) / . A"" \kCi \, u Y) . /I (4r r1, :K J--(...,, VL c ~, u '\"'--,, /o F1l\"- '1 ri ~> ;') () A<tvv <c Cc i~ t~ <t &.,, / ') 1 -\v_r,, 1 Chapter3 DECISION ANALYSIS Types of Decision-Making Environments Type 1: Decision making under certainty Decision maker knows with certainty the consequences of every alternative or 2 Semester 01, Academic Year 2019 - 2020 Chapter Outline 3.1 Types of Decision-Making Environments 3.2 Decision Making under Uncertainty 3.3 Decision Making under Risk Decision Making Under Uncertainty There are FIVE criteria for making decisions under uncertainty decision choice . ,_, A• i- 0 1 · i. i4 Type 2: Decision making under uncertainty - ·? v ' J; ,tdo { S . 1 , , f'... _ The decision maker does not know the ' Cl I t I Ctt . 1. Maximax (optimistic) 2. Maximin (pessimistic) 3 probabilities of the various outcomes Type 3: Decision making under risk The decision maker knows the probab ilities_ of the various outcomes - TUTORIAL MATERIAL 02 I Revised by Thanh Le 3. Criterion of realism (Hurwicz) 4. Equally likely (Laplace) 5. Minimax regret 4 1
Quantitative Methods for Business (BA168IU) (~O ~~ . J. .1-tt c~ 5 7 Structure of Decision Table " ~\\'~• , m' '~1 STATEOFJ~~! &ieiJ ~v,,~11a~m """"" -- AVORABt:E --1~,,\,~,. FAVORA '$) ~• ~~KEJ: , l$} ill ;,~ '; ' ' · ';i.~"'<i~,~~;, IIM..R . ~sJ ~\. ·- , ¼ , ~··~ ·'~"' >i.Sa.~,=-- Construct a large plant Construct a small plant Do nothing 200,000 100,000 0 -180 ,000 -20,000 0 --- --- --- - tJ .... lf(_ . [\P, 1'.1 '. \. c c1. l l.H" '') Criterion 2: Maximin Used to find the alternative that maximizes the minimum payoff Step 1: Find the minimum in rows Step 2: Select the maximum of the minimums in rows Construct a large 200,000 -180,000 -180,000 plant Construct a small 100,000 -20,000 -20,000 plant Do nothing 0 0 M axi ~ TUTORIAL MATERIAL 02 I Revised by Thanh Le 6 8 Semester 01, Academ\c '<ea, · Criterion 1: Maxi max Used to find the alternative that maximizes the maximum payoff Step 1: Find the maximum in rows Step 2: Select the maximum of the maximums in rows Construct a large 200,000 -180,000 plant Max1max Construct a small 100,000 -20 ,000 100,000 plant Do nothing 0 0 0 Criterion 3: Criterion of Realism A weighted average compromise between optimistic and pessimistic Select a coefficient of realism a Coefficient is between O and 1 Step 1: Compute the weighted averages in rows Weighted average = a(maximum in row) + (1 - a)(minimum in row) Step 2: Select the maximum of the weighted averages in rows 2

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