Exam 14: Decision Analysis

A convenience store chain is considering opening a new store at one of four locations. They have developed the following multi-criteria scoring model for this problem. Complete the table for this problem. What location should they choose based on this information?

Exhibit 14.5 The following questions are based on the information below. An investor is considering 4 investments, A, B, C, D. The payoff from each investment is a function of the economic climate over the next 2 years. The economy can expand or decline. The following decision tree has been developed for the problem. The investor has estimated the probability of a declining economy at 40% and an expanding economy at 60%. -Refer to Exhibit 14.5. What is the correct decision for this investor based on an expected monetary value criteria?

Exhibit 14.9 The following questions are based on the information below. An investor is considering 4 investments, W, X, Y, and Z. The payoff from each investment is a function of the economic climate over the next 2 years. The economy can expand or decline. The following payoff matrix has been developed for the investment decision problem. -Refer to Exhibit 14.9. Assume the formula =MIN(B5:C5) was entered in cell D5 and copied to cells D6:D8. What formula should go in cell E5 and get copied to cells E6:E8 to place a "<==" to indicate the choice according to the maximin decision rule?

An investor is considering 2 investments, A, B, which can be purchased now for $10. There is a 40% chance that investment A will grow rapidly in value and a 60% chance that it will grow slowly. If A grows rapidly the investor can cash it in for $80 or trade it for investment C which has a 25% chance of growing to $100 and a 75% chance of reaching $80. If A grows slowly it is sold for $50. There is a 70% chance that investment B will grow rapidly in value and a 30% chance that it will grow slowly. If B grows rapidly the investor can cash it in for $100 or trade it for investment D which has a 20% chance of growing to $95 and an 80% chance of reaching $80. If B grows slowly it is sold for $45. What is the multistage decision for this investor and what is the EMV for this decision?

Exhibit 14.9 The following questions are based on the information below. An investor is considering 4 investments, W, X, Y, and Z. The payoff from each investment is a function of the economic climate over the next 2 years. The economy can expand or decline. The following payoff matrix has been developed for the investment decision problem. -Refer to Exhibit 14.9. What decision should be made according to the minimax regret decision rule?

Expected regret is also called

Exhibit 14.5 The following questions are based on the information below. An investor is considering 4 investments, A, B, C, D. The payoff from each investment is a function of the economic climate over the next 2 years. The economy can expand or decline. The following decision tree has been developed for the problem. The investor has estimated the probability of a declining economy at 40% and an expanding economy at 60%. -Refer to Exhibit 14.5. How high can P(E) go before the investor's decision, based on expected monetary value criteria, changes?

The decision with the smallest expected opportunity loss (EOL) will also have the

A "risk averse" decision maker assigns the ____ relative utility to any payoff but has a(n) ____ marginal utility for increased payoffs.

Exhibit 14.9 The following questions are based on the information below. An investor is considering 4 investments, W, X, Y, and Z. The payoff from each investment is a function of the economic climate over the next 2 years. The economy can expand or decline. The following payoff matrix has been developed for the investment decision problem. -Refer to Exhibit 14.9. What formula should go in cell D5 and get copied to D6:D8 to implement the maximin decision rule?

A circular node in a decision tree is called a(n) ____ node.

What is the formula for the weighted average score for alternative j when using a multi-criteria scoring model?

A payoff matrix depicts ____ versus ____ with payoffs for each intersection cell.

A fast food restaurant is considering opening a new store at one of four locations. They have developed the following multi-criteria scoring model for this problem. What location should they choose based on this information? 1 Scores 2 Site Site Site Site Criterion 3 Criterion Weights 4 Sales 0.80 0.75 0.70 0.65 0.4 5 Location 0.70 0.80 0.88 0.95 0.3 6 Security 0.40 0.50 0.60 0.50 0.2 7 Growth 0.60 0.60 0.80 0.85 0.1 8 Weighted average score 1

Decision Analysis techniques provide modeling techniques to help decision makers make decisions. Which of the following is not typically a benefit of decision analysis?

The minimum EOL in a decision problem will always

How are states of nature assigned probabilities?

Exhibit 14.6 The following questions use the information below. A company is planning a plant expansion. They can build a large or small plant. The payoffs for the plant depend on the level of consumer demand for the company's products. The company believes that there is an 69% chance that demand for their products will be high and a 31% chance that it will be low. The company can pay a market research firm to survey consumer attitudes towards the company's products. There is a 63% chance that the customers will like the products and a 37% chance that they won't. The payoff matrix and costs of the two plants are listed below. The company believes that if the survey is favorable there is a 92% chance that demand will be high for the products. If the survey is unfavorable there is only a 30% chance that the demand will be high. The following decision tree has been built for this problem. The company has computed that the expected monetary value of the best decision without sample information is 154.35 million. The company has developed the following conditional probability table for their decision problem. -Refer to Exhibit 14.6. What formula should go in cell C13 of the probability table?

The decision rule which selects the alternative associated with the smallest maximum opportunity loss is the

Exhibit 14.13 The following questions use the information below. A student wants to buy a new car. She has three cars to choose from, A, B and C. The cars differ with respect to price, performance and looks. The student has developed the following AHP tables for price and summary. The other tables are not shown due to space limitations. -Refer to Exhibit 14.13. What formula should go in cell F11 and copied to cells F12:F13 of the Price worksheet to compute the Price Score?