Week 11 - Qualitative Decisions and AHP

Question 1

Expected Value Equation

Answer 1

= (odds of gain) * (value of gain)

Question 2

Allais’s Paradox

Answer 2

Rational approach to identifying optimum decision considering the probability and consequence of each possible outcome.

Question 3

Two types of errors people make

Answer 3

error in odds
error in value

Question 4

Reason for error in odds

Answer 4

We often base probability on what comes to mind fastest and most easily

Question 5

Decision Making Approaches

Answer 5

1. Brute force with weighting - Multi Criteria Analysis (MCA)
2. Risk based - uses risk = probability x consequence
3. Analytical Hierarchy
4. Delphi Method - minimises variance

Question 6

Analytical Hierarchy Process (AHP)

Answer 6

1. Define objective and decision options
2. Structure elements in criteria, sub-criteria, alternatives
3. Make pair wise comparisons of each element
4. Calculate weighting and consistency ratio
5. Evaluate alternatives based on weighting
6. Evaluate benefit cost analysis (BCA)
7. Make decision

Question 7

Why are individuals more consistent than groups

Answer 7

Individuals have preferences, these differ between the individuals in a group.

Question 8

Consistency Ratio

Answer 8

CR = CI/RI
CI - Consistency index
RI - Random Index

Question 9

Limitations of AHP

Answer 9

• Meaningless process if measures are not relevant
• Humans are inconsistent therefore many iterations of CI could be needed
• Pairwise comparisons increase drastically with n increase
• dependent variables are difficult

Question 10

Cognitive Fluency

Answer 10

How easy it is to process and understand

Question 11

Sunk Cost Fallacy example

Answer 11

Not leaving a bad movie before it ends because you paid for it.

Question 12

Self
Serving Bias

Answer 12

If we win its out success, if we lose its someone else’s fault

Question 13

Pseudo-diagnostic information

Answer 13

Imformation that isn’t really relevant but you think it is

Question 14

Subtlety Diagnostic Information

Answer 14

Information that is important but you think it isn’t

Question 15

Sorting relevance

Answer 15

Conformation bias - once you have decided on something, new info has little impact

Question 16

Productivity issues Frederick Taylor noticed

Answer 16

more productivity means u need less workers
workers will work at the slowest acceptable pace as they r paid
workers have freedom to create their own work procedures

Question 17

4 Principles of Scientific Management (Frederick Taylor)

Answer 17

1. Use Scientifically optimised work routines (discipline)
2. Scientifically select and train workers
3. Ensure work routines are followed
4. Managers and workers use scientific methods

Question 18

Drawbacks of Scientific Method

Answer 18

• Demoralising
• Work become monotonous and dehumanising
• low job satisfaction
• worker is just measured by output

Question 19

Push system

Answer 19

Everything is pushed out and there is likely waste at the end of the day

Question 20

Pull system

Answer 20

Made on demand (for example Subway)
minimises waste

Question 21

Purpose of LEAN

Answer 21

• increase productivity
• make what is needed when it is needed
• focus on the difference between value and waste
• eliminate waste

Question 22

Productivity Equation (won’t be given in exam)

Answer 22

P = Efficiency * In-bank correction load factor * heap capacity rated capacity * bucket fill factor/ Cycle time (fixed + var)
P = EIH*B/ C