Week 1 Flashcards
2 Types of Prescriptive Models
- Optimization (mathematical programming)
- Stochastic Optimization
What answer does prescriptive analytics answer
What is the optimal decision regarding resource allocation
Mktg/Sales application of Prescriptive models
- optimizing production, prices, best mix of mktg channels, negotiatingq
Transportation application of Prescriptive models
- how do you minimize costs?
—> eliminate uncessary driving
—> optimize distribution networks
Energy application of Prescriptive models
Finance/Banking application of Prescriptive models
Healthcare application of Prescriptive models
-> modeling wait times and optimizing it
4 stage modelling processq
- FRAMING: define the problem
-> what inputs, draw boundaries around mdoel - DIAGRAM: create a diagram to establish influences
-> what is the objective, what values are used to calculate, which variables can change, what variables are constrained & how - BUILD: use diagram to structure the problem
- GENERATE: insights (what-if, sensitivity, changes to constraints)
What models can you runn a sensitivity report on?
MODELS WITHOUT AN INTEGER CONSTRAINT!!!!!!!!
So you must remove integer constraints!!!!
-> when you have to remove it this gives you insights
what is granualrity
the level of detail!!!
i.e. you could model by seconds/or by minutes
Objective Cell
the quantity you want to maximize (profits, revenues, ROI) and minimize (costs)
Decision Variable cells/Changing cells
These are the variables you control that can be changed to optimize the objective.
THESE ARE THE VALUES YOU ARE BEING ASKED TO DECIDE
Constraints
the restrictions on the values in the decision variable cells
these are the lines that establsih how far out from the origin you can go AND NO FURTHER
What is the optimal solution
it is the point that is on the corner!
Feasible region
it is the set of all feasible solutions
What is the unsaid constraint? How do you make sure to handle it in solver?
-> The unsaid constraint is THAT UNCONSTRAINED VARIABLES SHOULD BE NON NEGATIVE
-> check the box!
Common MISTAKE
ARE YOU BEING ASKED TO MAX REVENUE OR MINIMIZE COST??
If it is minimizing cost then make sure to change that in solver
IP problems
make sure to put down integer constraints
