Chapter 8 continued:
Decision Analysis
Adding RISK
Decision Making Under Risk
Probabilities of outcomes are available
Expected Monetary Value (EMV) uses the
probabilities to calculate the average payoff
for each alternative
EMV (for alternative i) =
(pr
Chapter 8:
Decision Analysis
Example: Thompson Lumber Co.
1. Decision: Whether or not to make and
sell storage sheds
2. Alternatives:
Build a large plant to make the sheds
Build a small plant to make the sheds
Do not build a plant
3. Outcomes: Demand f
Chapter 6
Integer and Goal
Programming Models (contd)
(Using Binary constraints; Goal
Programming)
What is a BINARY Constraint?
A special case of Integer constraint
A Binary is an integer value that can be ONLY
either 0 or 1
A Binary is most often used
Chapter 6
Integer and Goal
Programming Models
Integer Programming Example
Harrison Electric Co.
Produce 2 products (lamps and ceiling fans) using
2 limited resources
Decisions: How many of each product to
make? (the results must be integers)
Objective: Ma
MIDTERM EXAM REVIEW
Chapters 1 - 5
Approach
Organized by Chapter
Broken down into Concepts, or topics of
importance, and Problems, or applications
using Excel or other calculation tools
Chapter 1
Concepts
Deterministic vs Probablistic models
Quantitat
Chapter 5:
Transportation, Assignment
and Network Models
(Maximum Flow, Shortest Route)
The Maximal-Flow Model
Networks have arcs with limited capacity, such
as roads or pipelines
Business applications:
Traffic and transportation control
Airline schedul
Chapter 5:
Transportation, Assignment
and Network Models
(Transshipment & Assignment)
The Transshipment Model
Similar to a transportation model
Has some Transshipment nodes with
both inflow and outflow
The Net Flow refers to a Node &
determines the RHS
Chapter 4:
Linear Programming
Sensitivity Analysis
What if there is uncertainty about one or
more data values in an LP model?
Sensitivity analysis allows us to determine
how sensitive the optimal solution is to
changes in data values.
Then, we will have m
Employee Staffing Application:
Labor Planning
HongKongBank
Number of tellers needed varies by time of day
Decisions: How many tellers should begin work at
various times of the day?
Objective: Minimize the personnel cost
Time Period
9 10
10 11
11 12
Min No
Chapter 3:
Linear Programming
Modeling Applications with
Computer Analysis in Excel
LP Applications for Managerial
Decisions
Manufacturing
Marketing
Finance
Employee staffing
Logistics
Operations
Multiperiod planning
Modeling and Solving with LPs
Special Situations in LP
1. Redundant Constraints - do not affect the
feasible region
Example:
x < 10
x < 12
The second constraint is redundant because it
is less restrictive.
Special Situations in LP
1. Infeasibility when no feasible solution
exists (i.e