ITM 501 Lecture Notes - Lecture 2: Decision Model, Emv, Perfect Information

• School: Ryerson University
• Department: Information Technology Management
• Course: ITM 501
• Professor: Amir Gandomi

Document Summary

3 do not developthenewproductline alternatives acourse ofactionor astrategychosen by a decisionmaker. Step 3 identifypossibleoutcomes statesof nature marketcould be favourable orunfavourable. States of nature an outcome oroccurrenceoverwhichthedecisionmakerhas little or no control. Step4 list thepayoffs identify conditionalvaluesfor the profitsof a largeplant smallplant 3 nodevelopmentforthe 2possible marketconditions conditionalvalves a consequence normallyexpressed in a monetaryvalue thatoccurs as aresultofa particularalternative or state ofnature construct a decisiontable to presentthesevalues. Steps select decisionmodel depends onthe environmentandrisk 3 uncertainty. 1 decisionmakingundercertainty decision maker knows wicertainty the consequenses ofeveryalternative or decisionchoice. 2 decisionmakingunderuncertainty decisionmakerdoes not know theprobabilities of the various outcomes. 3 decisionmakingunder risk thedecision makers knowstheprobabilities of theoccurrences of various outcomes. Optimistic maximax used tofind thealternative that maximizes themaximum payoff highestpossiblereturn. First4critereacanbedeterminedusingdecisiontable last 2 use opportunitylosstable bestpayoff for eachalternative is considered. And alternative w best of these is selected. 2 select alternative w the maximum number best of thebest. 2 select the alternate with the maximum number best of the worst.