LOMA 335: Module 2 (Chapters 5-9)
Questions and Answers Verified by Experts
Expert Systems Systems that classify data by sorting it into distinctive sets, then using
sample data classification as a basis for finding more patterns in an associated database.
Decision Theory Model A quantitative approximation of the real-world processes used in
making rational decisions.
Certainty No potential for deviation from expected outcome
Risk Incomplete but reliable information is available
Uncertainty Little or no reliable information is available and each state of nature has an
equal probability of occurring.
Payoff Table A decision analysis tool that summarizes potential outcomes from a decision
in a tabular format.
, Conditional Payoff Table Decision analysis tool that shows 2 or more states of nature, and
each cell contains a projected payoff value based on at least 2 conditions (the decision alternative
and the state of nature).
Dominant Decision Alternative Exists when the same decision alternative leads to the best
expected payoff no matter the state of nature.
EMV Criterion Requires the analyst to calculate the expected monetary value for each
potential decision outcome. When it is applied consistently over time to a number of decisions it
generally identifies the decision alternative that will yield the best outcomes.
Insufficient Reason Criterion Requires decision maker to select the option with the best
total payoff. This is the decision alternative with the highest profits or lowest expenses.
Maximax Criterion Requires the analyst to identify the decision alternative that
maximizes the maximum projected payoff.
Maximin Criterion Designed to identify the decision alternative that will yield the
minimum payoff.
Questions and Answers Verified by Experts
Expert Systems Systems that classify data by sorting it into distinctive sets, then using
sample data classification as a basis for finding more patterns in an associated database.
Decision Theory Model A quantitative approximation of the real-world processes used in
making rational decisions.
Certainty No potential for deviation from expected outcome
Risk Incomplete but reliable information is available
Uncertainty Little or no reliable information is available and each state of nature has an
equal probability of occurring.
Payoff Table A decision analysis tool that summarizes potential outcomes from a decision
in a tabular format.
, Conditional Payoff Table Decision analysis tool that shows 2 or more states of nature, and
each cell contains a projected payoff value based on at least 2 conditions (the decision alternative
and the state of nature).
Dominant Decision Alternative Exists when the same decision alternative leads to the best
expected payoff no matter the state of nature.
EMV Criterion Requires the analyst to calculate the expected monetary value for each
potential decision outcome. When it is applied consistently over time to a number of decisions it
generally identifies the decision alternative that will yield the best outcomes.
Insufficient Reason Criterion Requires decision maker to select the option with the best
total payoff. This is the decision alternative with the highest profits or lowest expenses.
Maximax Criterion Requires the analyst to identify the decision alternative that
maximizes the maximum projected payoff.
Maximin Criterion Designed to identify the decision alternative that will yield the
minimum payoff.
