B A 360 Lecture Notes - Lecture 3: Decision Tree Learning, Decision Table, Emv
Document Summary
The decision making process: problem > quantitative/qualitative analysis > decision. Quantitative analysis: logic, historical data, marketing, research, modeling. Decision theory: general approach to decision making which is suitable for a range of operations management decisions such as: capacity planning, location planning, equipment selection. Rationality: decision makers are perfect calculators, aim to maximize their payoffs. Appropriate for showing sequential decisions: define the problem. 3) assign probabilities to the states of nature. 4) estimate payoffs for each possible combination of decision alternatives and states of nature. 5) solve the problem by working backwards through the tree computing the emv for each state-of-nature node. States of nature: branches leaving a circular node. | | option b (state of nature node) unfavorable market. Costs, human abilities, time, technology, and availability of information. The results of different departments each attempting to reach a solution that is optimum for that department. Complete uncertainty as to which state of nature may occur.
