QUANTECH Flashcards
7 Steps of Problem Solving
- Define the problem.
- Identify the set of alternative solutions.
- Determine the criteria for evaluating alternatives.
- Evaluate the alternatives.
- Choose an alternative (make a decision).
- Implement the chosen alternative.
- Evaluate the results.
Reasons for using quantitative analysis:
- The problem is complex.
- The problem is very important.
- The problem is new.
- The problem is repetitive.
Quantitative Analysis Process
- Model Development
- Data Preparation
- Model Solution
- Report Generation
Types of Models
- Iconic
- Analog
- Mathematical
A type of model that involves physical replicas
Iconic
A type of model that involves Physical but not visually similar.
Analog
A type of model that Represent problems with formulas
Mathematical
Essential for accurate analysis, but time-consuming and prone to errors.
Data preparation
Involves user involvement, monitoring, and refining as necessary.
Model Implementation
The body of knowledge involving quantitative approaches to decision making is reffered to as:
- Management Science
- Operations Research
- Decision Science
Must be made in selecting an appropriate mathematical model
Cost/benefit considerations
Mathematical models are said to be _____ if any of the uncontrollable inputs is subject to variation.
Stochastic
If any of the uncontrollable inputs in a mathematical model are NOT subject to variation, they are ___________
Deterministic
The values of the decision variables that provide the mathematically-best output are referred to as the _______ ________
Optimal Solution
Controllable Inputs are also called as
Decision Variables
Uncontrollable Inputs are also called as
Environmental Factors
Is an algebraic equation in which each term is either a
constant or the product of a constant and (the first power of) a single variable.
ax+by=c
Linear Equation
A visual representation of decisions (square nodes) and chance events (round nodes).
Decision Tree
Choose the decision with the largest payoff.
Optimistic Approach (Maximax)
Select the decision with the best worst-case scenario
Conservative Approach (Maximin)
Minimize potential regret
Minimax Regret Approach
Recognizes the variance between expected value and actual outcomes. helps the decision maker recognize the difference between:
the expected value of a decision alternative, and the payoff that might actually occur
Risk Analysis
Assesses how input changes affect recommended decisions. Can be used to determine how changes to the following inputs affect the recommended decision alternative: probabilities for the states of nature values of the payoffs
Sensitivity Analysis
Initial estimates before sample information.
Prior to obtaining this information, the probability estimates for the states of nature are called
Prior Probabilities
Likelihoods based on states of nature
It is a condition where the inequality is true for certain values of the unknown involved
Conditional Probabilities
Updates prior probabilities to posterior probabilities.
These prior probabilities can be revised by employing what Theorem?
can be used to compute branch probabilities for decision trees
Bayes’ Theorem
Evaluates the usefulness of sample data
is the ratio of EVSI to EVPI expressed as a percent
Efficiency of Sample Information (E)
is the first step of decision making. It is crucial as it sets the stage for the decision-making process, clarifying what needs to be addressed before exploring potential solutions or alternatives.
Definition of a Problem
are the ways to evaluate the choices faced by the decision maker. They serve as standards or benchmarks used to assess and compare different options when making a decision
Decision Criteria
A model that uses a system of symbols to represent a problem is called a
Mathematical Model
A physical model that does not have the same physical appearance as the object being modeled is an
Analog Model
Must occur prior to the quantitative analysis process, must involve the analyst and the user of the results, and includes specific objectives and operating constraints.
Problem Definition
The volume that results in total revenue being equal to total cost is the ________. At this point, there is neither profit nor loss.
Break-even point
When the value of the output cannot be determined even if the value of the controllable input is known, the model is?
Stochastic
A system of equations with no solution is called an
Inconsistent System
A system of equations with only one solution is called an
Consistent
A system of equations with multiple solutions is called an
Dependent
The quantitative analysis approach requires __________ __________ for the relationships.
Mathematical Expressions
is a statement that one quantity or expression is greater or less than another quantity or expression
Inequality
It is a condition where the inequality is true for all values of the unknown involved
Absolute Inequality
First step in decision analysis process
Problem Formulation
The consequence resulting from a specific combination of a decision alternative and a state of nature
Can be expressed in terms of profit, cost, time, distance or any other appropriate measure.
Payoff
are representations of real objects or situations
Models
A table showing payoffs for all combinations of decision alternatives and states of nature
Payoff Table
is a graphical device showing the relationships among the decisions, the chance events, and the consequences
Influence Diagram
depict decision nodes
Squares or rectangles
depict chance nodes.
Circle
depict consequence nodes.
Diamonds
connecting the nodes show the direction of influence.
Lines or arcs
Leaving a round node represent the different states of nature; branches leaving a square node represent the different decision alternatives
Branches
correspond to chance events
Round nodes
to identify the best or recommended decision alternative.
the sum of the weighted payoffs for the decision alternative.
Expected Value Approach
is the increase in the expected profit that would result if one knew with certainty which state of nature would occur.
provides an upper bound on the expected value of any sample or survey information.
Expected value of perfect information (EVPI)
is the additional expected profit possible through knowledge of the sample or survey information
Expected Value of Sample Information
a decision alternative shows the possible payoffs for the decision alternative along with their associated probabilities
Risk profile
