BU346
Dr. Kydd
Assignment 4
1.
A company has budgeted $5 million for the coming fiscal year to be allocated among
its plants in Akron, Baltimore and Chicago. The $5 million is to be allocated in $1
million block amounts, with a maximum of $4 million going
BU346
Dr. Kydd
Assignment 1
The executives of the General Products Company (GPC) have to decide which of
three products to introduce, A, B, or C. Product C is essentially a risk-free proposition,
from which the company will obtain a net profit of $1 milli
?
Probability Theory
Random experiment or process
Process that results in 1 of many possible
_ where each outcome is predicted
by a probability
Sample space
Set of all possible outcomes in a _
process
Probability
# favorable outcomes/_ # of all
possible o
BU346
Dr. Kydd
Assignment 3
1.
The Relax-and-Enjoy Lake Development Corporation is developing a lakeside
community at a privately owned lake and is in the business of selling property for
vacation and/or retreat cottages. The primary market for these lake
Chapter 13 Simulation
Learning Objectives
1. 2. 3. 4. Understand what simulation is and how it aids in the analysis of a problem. Learn why simulation is a significant problem-solving tool. Understand the difference between static and dynamic simulation.
?
Probability Theory
Random experiment or process
Process that results in 1 of many possible
outcomes where each outcome is predicted
by a probability
Sample space
Set of all possible outcomes in a random
process
Probability
# favorable outcomes/total # o
BU346
Dr. Kydd
Assignment 2
A farmer is attempting to decide which of three crops he should plant on his onehundred-acre farm. The profit from each crop is strongly dependent on the rainfall
during the growing season. He has categorized the amount of rain
? Quick Review of Discrete and
Continuous Distributions
Random Variable
Discrete
Continuous
Discrete _ Distribution
Binomial
Continuous Probability Distribution
Normal (and _ Approximation
to Binomial)
?
Random Variable
Variable that takes on a set of uni
Bayes Theorem
_ Table
?
2nd letter
1st letter
A
B
Total
C
200
50
250
D
160
190
350
E
240
160
400
Total
600
400
1000
?
Bayes Theorem
Joint Probability table
2nd letter
1st letter
A
B
Total
C
.20
.05
.25
D
.16
.19
.35
E
.24
.16
.40
Total
.60
.40
1.00
Find t
?
?
?
Goal Programming
Mathematical model similar to Linear
Programming, however it allows for
multiple goals to be satisfied at the same
time. Also the multiple goals can be
prioritized and weighted to account for the
DMs utility for meeting the various
?
?
?
Goal Programming
Priority levels
Different levels for goals that give
relative _ to the various
goals (in addition to weights)
P1
P2
Represents highest priority
Represents next highest
priority; _ next
nex
long as there is no reduc
redu
in achieveme
BUAD 346 Exam 2 Review
Topics
Goal Programming (Assignment 3)
Formulation
o Economic constraints
o Goal constraints
o Objective function (min ds)
Graphical solution
o Identify the optimal point
o Find complete solution
MARKOV process (Quiz 4)
Steady state
Bayes Theorem
Frequency Table
?
2nd letter
1st letter
A
B
Total
C
200
50
250
D
160
190
350
E
240
160
400
Total
600
400
1000
?
Bayes Theorem
Joint Probability table
2nd letter
1st letter
A
B
Total
C
.20
.05
.25
D
.16
.19
.35
E
.24
.16
.40
Total
.60
.40
1.0
? Quick Review of Discrete and
Continuous Distributions
Random Variable
Discrete
Continuous
Discrete Probability Distribution
Binomial
Continuous Probability Distribution
Normal (and Normal Approximation
to Binomial)
?
Random Variable
Variable that takes
BUAD Exam I
Probability Theory
Random Experiment or process
Process that results in 1 of many possible outcomes where each outcome is predicted by
a probability
Sample Space
Set of all possible outcomes in a random process
Probability
# favorable outcomes
?
Utility Theory
1. Suppose that you live in a floodplain and
stand to lose $100,000 if a flood occurs.
The probability of a flood is .001 in a
given year. Flood insurance costs $300.
What do you do? Explain.
EMV = $100
?
Utility Theory
2. Suppose you win
?
Utility Theory
Utility can be _ many ways:
U(x) = +
x
U(x) = log (x)
x
U(x)
100
4.0
250
6.0
500
7.5
800
8.5
?
Utility Theory
Certainty Equivalent for Losses:
Amount you would pay for certain in
order to avoid having to play the game or
gamble
Los (.5)
$
? Sequential Decision Making
Decision trees are very useful when there are
multiple decisions to be made and they follow a
sequence in time. There are also usually multiple
sets of states.
sion 1 CP
Decision 1
Decision 2
Decision 3
Deci
Decision 2
e1
t
a
FINAL PAPER/PRESENTATION GUIDELINES
BUAD346
I. Statement of the Problem/Decision (20 pts.)
1-2 pages
Give a brief description of the problem or decision that you face. If appropriate,
lay out the options as you see them.
II. Description of the Proposed me
Chapter 17
Markov Processes Part 1
Markov Processes
Markov
process models are useful in
studying the evolution of systems over
repeated trials or sequential time periods or
stages.
Examples:
Brand Loyalty
Equipment performance
Stock performance
Markov P
Agenda for This Week
Wednesday, April 20
Dynamic
Programming Case 3 Due
Dynamic
Friday, April 22 Monday, April 25 Wednesday, April 27
Programming
AHP AHP
Chapter 18
Dynamic Programming Part 2
Dynamic Programming
1.
Backward Recursion
Determine optimal pol
Chapter 14
Decision Analysis
Decision Making Environments
Decisions
can occur under one of three
circumstances:
Conditions of certainty
Conditions of uncertainty
Conditions of risk
Examples of each?
Problem Formulation &
Definitions
A
decision problem is
Chapter 13
Simulation Part 2
Brew-Thru Example
Service entrance Car 3 Car 2
Service lane Car 1 Exit
Waiting area
Note: Customers balk if more than 4 cars in line
Monte Carlo Simulation
1. Set up probability distributions for the exogenous variables 2. Bui
Chapter 13
Simulation
Background
Simulation
is one of the most frequently
employed management science
techniques.
It is typically used to model random
processes that are too complex to be
solved by analytical methods.
Advantages
Simulation is relatively
Chapter 1
Introduction to Decision Making
Decision Analysis
Science?
".prescriptive approach designed for normally intelligent people who want to think hard and systematically about some important real problems." - Keeney and Raiffa, 1976 ".when should w
BUAD346 Final Paper/Presentation Each student is required to write and present a paper which applies one of the decision modeling techniques discussed in class to a particular problem or area of interest (in Operations Management or another field of conce