Question 1

For a minimization problem,the optimistic approach is often referred to as the

Accepted Answer

A) minimax approach 
B) maximin approach 
C) maximax approach 
D) minimin approach 
A) minimax approach 
B) maximin approach 
C) maximax approach 
D) minimin approach

Question 2

​A high efficiency rating indicates that the sample information is almost as good as perfect information.

Accepted Answer

A) True 
 B)False

Question 3

Expected value is the sum of the weighted payoff possibilities at a circular node in a decision tree.

Accepted Answer

A) True 
 B)False

Question 4

​The primary value of decision trees is as a useful way of organizing how operations managers think about complex multiphase decisions.

Accepted Answer

A) True 
 B)False

Question 5

To find the EVSI,

Accepted Answer

A) use the EVPI to calculate sample information probabilities. 
B) use indicator probabilities to calculate prior probabilities. 
C) use prior and sample information probabilities to calculate revised probabilities. 
D) use sample information to revise the sample information probabilities. 
A) use the EVPI to calculate sample information probabilities. 
B) use indicator probabilities to calculate prior probabilities. 
C) use prior and sample information probabilities to calculate revised probabilities. 
D) use sample information to revise the sample information probabilities.

Question 6

After all probabilities and payoffs are placed on a decision tree,the decision maker calculates expected values at state of nature nodes and makes selections at decision nodes.

Accepted Answer

A) True 
 B)False

Question 7

​When the expected value approach is used to select a decision alternative,the payoff that actually occurs will usually have a value different from the expected value.

Accepted Answer

A) True 
 B)False

Question 8

A chemical company is trying to decide whether to build a pilot plant now for a new chemical process or to build the full plant now.If they build a pilot plant now,they could expand it later to a full plant or license the plant to another company.It would cost them $2 million to build the pilot plant and another $2 million later to expand it.If they build the full plant now it would cost $3.5 million to construct.
​
The returns they expect to get from the full production plant depend upon the market.They estimate there is a 60% chance the market will be robust,a 30% chance it will remain stable,and a 10% chance it will become stagnate.The returns are estimated to be $5 million if it is robust,$3 million if it is stable,and $1 million if it is stagnate.
​
Before they expand the pilot plant,they plan to conduct a comprehensive study.Based on past experience,they expect the study to report a 60% chance of favorable outcome for expansion and a 40% unfavorable chance.In either case they will have to decide whether to expand to a full plant or license the pilot plant.If the report is favorable and they license it,they expect to get $3 million.However,if the report is unfavorable and they license it,they will only get $1 million.
​
Develop a decision tree for this problem and determine the optimal decision strategy.

Accepted Answer

​
​
​
 @#IMG-DLM& 
​​
Company should bui

Question 9

A payoff table is given as
​
   
a.What choice should be made by the optimistic decision maker?
b.What choice should be made by the conservative decision maker?
c.What decision should be made under minimax regret?
d.If the probabilities of d1,d2,and d3 are .2,.5,and .3,respectively,then what choice should be made under expected value?
e.What is the EVPI?

Accepted Answer

a. @#LAT-DLM&
b. @#LAT-DLM&
c.

Question 10

EVPI is always greater than or equal to EVSI.

Accepted Answer

A) True 
 B)False

Question 11

Sensitivity analysis considers

Accepted Answer

A) how sensitive the decision maker is to risk. 
B) changes in the number of states of nature. 
C) changes in the values of the payoffs. 
D) changes in the available alternatives. 
A) how sensitive the decision maker is to risk. 
B) changes in the number of states of nature. 
C) changes in the values of the payoffs. 
D) changes in the available alternatives.

Question 12

Decision tree probabilities refer to

Accepted Answer

A) the probability of finding the optimal strategy 
B) the probability of the decision being made 
C) the probability of overlooked choices 
D) the probability of an uncertain event occurring 
A) the probability of finding the optimal strategy 
B) the probability of the decision being made 
C) the probability of overlooked choices 
D) the probability of an uncertain event occurring

Question 13

Use graphical sensitivity analysis to determine the range of values of the probability of state of nature s1 over which each of the decision alternatives has its largest expected value.

Accepted Answer

EV(d₁)and EV(d₂)intersect at p =

Question 14

​Explain why the decision maker might feel uncomfortable with the expected value approach,and decide to use a non-probabilistic approach even when probabilities are available.

Accepted Answer

The decision maker might feel uncomforta

Question 15

The expected value approach is more appropriate for a one-time decision than a repetitive decision.

Accepted Answer

A) True 
 B)False

Question 16

An appliance dealer must decide how many (if any)new microwave ovens to order for next month.The ovens cost $220 and sell for $300.Because the oven company is coming out with a new product line in two months,any ovens not sold next month will have to be sold at the dealer's half price clearance sale.Additionally,the appliance dealer feels he suffers a loss of $25 for every oven demanded when he is out of stock.On the basis of past months' sales data,the dealer estimates the probabilities of monthly demand (D)for 0,1,2,or 3 ovens to be .3,.4,.2,and .1,respectively.
The dealer is considering conducting a telephone survey on the customers' attitudes towards microwave ovens.The results of the survey will either be favorable (F),unfavorable (U)or no opinion (N).The dealer's probability estimates for the survey results based on the number of units demanded are:
​
 $$\begin{array} { | l | l | l | l | } 
\hline \mathrm { P } ( \mathrm { F } \mid \mathrm { D } = 0 ) = .1 & \mathrm { P } ( \mathrm { F } \mid \mathrm { D } = 2 ) = .3 & \mathrm { P } ( \mathrm { U } \mid \mathrm { D } = 0 ) = .8 & \mathrm { P } ( \mathrm { U } \mid \mathrm { D } = 2 ) = .1 \
\hline \mathrm { P } ( \mathrm { F } \mid \mathrm { D } = 1 ) = .2 & \mathrm { P } ( \mathrm { F } \mid \mathrm { D } = 3 ) = .9 & \mathrm { P } ( \mathrm { U } \mid \mathrm { D } = 1 ) = .3 & \mathrm { P } ( \mathrm { U } \mid \mathrm { D } = 3 ) = .1 \
\hline
\end{array}$$ 
a.What is the dealer's optimal decision without conducting the survey?
b.What is the EVPI?
c.Based on the survey results what is the optimal decision strategy for the dealer?
d.What is the maximum amount he should pay for this survey?

Accepted Answer

​
​
 @#IMG-DLM& a. Order one o

Question 17

The Super Cola Company must decide whether or not to introduce a new diet soft drink.Management feels that if it does introduce the diet soda it will yield a profit of $1 million if sales are around 100 million,a profit of $200,000 if sales are around 50 million,or it will lose $2 million if sales are only around 1 million bottles.If Super Cola does not market the new diet soda,it will suffer a loss of $400,000.
a.Construct a payoff table for this problem.
b.Construct a regret table for this problem.
c.Should Super Cola introduce the soda if the company: (1)is conservative; (2)is optimistic; (3)wants to minimize its maximum disappointment?
d.An internal marketing research study has found P(100 million in sales)= 1/3;P(50 million in sales)= 1/2;P(1 million in sales)= 1/6.Should Super Cola introduce the new diet soda?
e.A consulting firm can perform a more thorough study for $275,000.Should management have this study performed?

Accepted Answer

​
 a.
@#IMG-DLM&

b.
@#IMG-DLM& 
c. (1)

Question 18

The minimum expected opportunity loss provides the best decision,regardless of whether the decision analysis involves minimization or maximization.

Accepted Answer

A) True 
 B)False

Question 19

How can a good decision maker "improve" luck?

Accepted Answer

A good decision maker can "improve" luck

Question 20

For a maximization problem,the optimistic approach is often referred to as the

Accepted Answer

A) minimax approach 
B) maximin approach 
C) maximax approach 
D) minimin approach 
A) minimax approach 
B) maximin approach 
C) maximax approach 
D) minimin approach

For a minimization problem,the optimistic approach is often referred to as the

A high efficiency rating indicates that the sample information is almost as good as perfect information.

Expected value is the sum of the weighted payoff possibilities at a circular node in a decision tree.

The primary value of decision trees is as a useful way of organizing how operations managers think about complex multiphase decisions.

To find the EVSI,

After all probabilities and payoffs are placed on a decision tree,the decision maker calculates expected values at state of nature nodes and makes selections at decision nodes.

When the expected value approach is used to select a decision alternative,the payoff that actually occurs will usually have a value different from the expected value.

EVPI is always greater than or equal to EVSI.

Sensitivity analysis considers

Decision tree probabilities refer to

Use graphical sensitivity analysis to determine the range of values of the probability of state of nature s₁ over which each of the decision alternatives has its largest expected value.

Explain why the decision maker might feel uncomfortable with the expected value approach,and decide to use a non-probabilistic approach even when probabilities are available.

The expected value approach is more appropriate for a one-time decision than a repetitive decision.

The minimum expected opportunity loss provides the best decision,regardless of whether the decision analysis involves minimization or maximization.

How can a good decision maker "improve" luck?

For a maximization problem,the optimistic approach is often referred to as the

Introduction

Introduction to Probability

Probability Distributions

Utility Game Theory

Time Series Analysis Forecasting

Intro to Linear Programming

LP Sensitivity Analysis

LP Applications

Distribution Network Models

Integer Linear Programming

Advanced Optimization Applications

Project Scheduling

Inventory Models

Waiting Line Models

Simulation

Markov Processes

Filters

Exam 4: Decision Analysis

For a minimization problem,the optimistic approach is often referred to as the

​A high efficiency rating indicates that the sample information is almost as good as perfect information.

Expected value is the sum of the weighted payoff possibilities at a circular node in a decision tree.

​The primary value of decision trees is as a useful way of organizing how operations managers think about complex multiphase decisions.

To find the EVSI,

After all probabilities and payoffs are placed on a decision tree,the decision maker calculates expected values at state of nature nodes and makes selections at decision nodes.

​When the expected value approach is used to select a decision alternative,the payoff that actually occurs will usually have a value different from the expected value.

EVPI is always greater than or equal to EVSI.

Sensitivity analysis considers

Decision tree probabilities refer to

Use graphical sensitivity analysis to determine the range of values of the probability of state of nature s1 over which each of the decision alternatives has its largest expected value.

​Explain why the decision maker might feel uncomfortable with the expected value approach,and decide to use a non-probabilistic approach even when probabilities are available.

The expected value approach is more appropriate for a one-time decision than a repetitive decision.

The minimum expected opportunity loss provides the best decision,regardless of whether the decision analysis involves minimization or maximization.

How can a good decision maker "improve" luck?

For a maximization problem,the optimistic approach is often referred to as the

Introduction

Introduction to Probability

Probability Distributions

Utility Game Theory

Time Series Analysis Forecasting

Intro to Linear Programming

LP Sensitivity Analysis

LP Applications

Distribution Network Models

Integer Linear Programming

Advanced Optimization Applications

Project Scheduling

Inventory Models

Waiting Line Models

Simulation

Markov Processes

Filters

A high efficiency rating indicates that the sample information is almost as good as perfect information.

The primary value of decision trees is as a useful way of organizing how operations managers think about complex multiphase decisions.

When the expected value approach is used to select a decision alternative,the payoff that actually occurs will usually have a value different from the expected value.

Use graphical sensitivity analysis to determine the range of values of the probability of state of nature s₁ over which each of the decision alternatives has its largest expected value.

Explain why the decision maker might feel uncomfortable with the expected value approach,and decide to use a non-probabilistic approach even when probabilities are available.