5 Steps in the Decision Making Process
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1. Define the Problem
2. List all alternatives (states of nature)
3. Identify outcomes for each alternative
4.Identify payoff for each combination of alts
5. Pick an alternative
Expected Value with Perfect Information (EVwPI)
Expected Value of Perfect Information (EVPI)
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EVwPI is the line connecting the highest weakD pt. and strondD pt.
EVPI = EVwPI - EMVmax
, EMVmax = EMV covering most area of X-axis as the greatest choice
MAXIMAX
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Choose the highest profit for each choice (not always strong), then choose
the choice with the highest of those profits.
Types of Solutions
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Unique Optimal (one best)
Multiple Optimal (more than one best)
Infeasible Solution
Unbounded
Example of a System
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Give this one a try later!
1. Define the Problem
2. List all alternatives (states of nature)
3. Identify outcomes for each alternative
4.Identify payoff for each combination of alts
5. Pick an alternative
Expected Value with Perfect Information (EVwPI)
Expected Value of Perfect Information (EVPI)
Give this one a try later!
EVwPI is the line connecting the highest weakD pt. and strondD pt.
EVPI = EVwPI - EMVmax
, EMVmax = EMV covering most area of X-axis as the greatest choice
MAXIMAX
Give this one a try later!
Choose the highest profit for each choice (not always strong), then choose
the choice with the highest of those profits.
Types of Solutions
Give this one a try later!
Unique Optimal (one best)
Multiple Optimal (more than one best)
Infeasible Solution
Unbounded
Example of a System
Give this one a try later!
