QMETHODS & MANSCIE Module 3 DECISION ANALYSIS(3).pdf

SLIDESMANIA.COM DECISION ANALYSIS SLIDESMANIA.COM DECISION ANALYSIS To avoid mistakes, decision should be made systematically. Decision Theory is a body of knowledge and related ana...

SLIDESMANIA.COM DECISION ANALYSIS SLIDESMANIA.COM DECISION ANALYSIS To avoid mistakes, decision should be made systematically. Decision Theory is a body of knowledge and related analytical techniques of different degrees of formality designed to help a decision maker choose among a set of alternatives considering their possible consequences.  Problem! Sample SLIDESMANIA.COM  DECISION ANALYSIS SLIDESMANIA.COM A farmer in Region 3 must decide which crop to plant next year on his land: corn, peanuts, or soybeans. The return from each crop will be determined by whether a new trade bill with Hongkong passes the senate. The profit the farmer will realize from each crop given the two possible results on the trade bill is shown in the following payoff table:  DECISION ANALYSIS SLIDESMANIA.COM  DECISION ANALYSIS SLIDESMANIA.COM DECISION ANALYSIS : MAXIMUM (EMV): 1,350,000 GIVEN BY CORN MAXIMAX: 2,000,000 BY CORN MAXIMIN: 1,200,000 BY SOYBEANS  Problem! Sample SLIDESMANIA.COM  DECISION ANALYSIS SLIDESMANIA.COM Mary, the Market Analyst of Nestle, was able to determine the probability of occurrence of each type of market. The figures are summarized in the table below: What will be Mary’s Decision?  DECISION ANALYSIS SLIDESMANIA.COM DECISION ANALYSIS : MAXIMUM (EMV): 2,300 GIVEN BY CONSTRUCT A PLANT MAXIMAX: 8,000 GIVEN BY CONSTRUCT A PLANT MAXIMIN: 0.00 GIVEN BY DO NOTHING