Chapter 3: Decision Analysis

Question 1

a tool comprising of different methodologies necessary to address decision in quantitative manner

Answer 1

Decision Analysis

Question 2

a systematic, quantitative and interactive approach to addressing and evaluating important choices

Answer 2

Decision Analysis

Question 3

used to develop an optimal strategy when a decision maker is faced with several decision alternatives

Answer 3

Decision Analysis

Question 4

from optimization and optimal solution where decision analysis starts from formulating problem

Answer 4

Optimal Strategy

Question 5

It is the first step in the decision analysis process

Answer 5

Problem Formulation

Question 6

Parts of Problem Formulation

Answer 6

-Decision Alternatives
-State of Nature (Chance Events)
-Resulting Payoffs

Question 7

are the different possible strategies the decision maker can employ

Answer 7

Decision Alternatives

Question 8

uncertain future events or weak demand, moderate demand, strong demand

Answer 8

State of Nature (Chance of Events)

Question 9

consequences resulting from decision alternatives and chance events

Answer 9

Resulting Payoffs

Question 10

Management scientist and professor from Stanford University that defined the decision analysis discipline in 1964 and has played a major role in the research, education, and application of many aspects of the field.

Answer 10

Ronald Howard

Question 11

Approaches in Decision Making without Probabilities (Decision Making under Uncertainty)

Answer 11

-Optimistic Approach
-Conservative Approach
-Laplace
-Minimax Regret Approach

Question 12

Approaches in Decision Making with Probabilities (highest expected value (EV) or decision with best expected return)

Answer 12

Decision Tree

Question 13

a chronological representation of the decision problem

Answer 13

Decision Tree

Question 14

largest possible payoff/ largest in strong demand (favorable market)

Answer 14

Optimistic Approach

Question 15

Maximax/ Maximum of all maximum

Answer 15

Optimistic Approach

Question 16

maximum of the minimum payoff is selected/ largest in weak demand (unfavorable market)

Answer 16

Conservative Approach

Question 17

Maximin/ Maximum of all minimum

Answer 17

Conservative Approach

Question 18

best weighted payoff/ highest average payoff for each alternative

Answer 18

Laplace

Question 19

Equally Likely

Answer 19

Laplace

Question 20

minimum of the maximum regret

Answer 20

Minimax Regret Approach

Question 21

difference between large and small payoffs from each payoff

Answer 21

Minimax Regret Approach

Question 22

Minimax/ Minimum of all maximum

Answer 22

Minimax Regret Approach