Universidad Nacional Abierta y a Distancia

Vicerrectoría Académica y de InvestigaciónSyllabus of the Course

Theory of Decisions, Code 212066

Task 2 - Solving problems of decision models under risks

1. Description of the activity

Activity type: In group - Collaborative

Time of assessment: Intermediate
Maximum activity score: 100 points
The activity starts on: Wednesday, Activity ends on: Tuesday, October 6,
September 9, 2020 2020
This activity is expected to achieve the following learning outcomes:

Propose solution models using decision trees, expected value and utility theory
associated with production and service problems.

Apply the solution methods in decision problems using expected value, decision trees
and utility theory to search for optimal results that generate the most efficient
answers.

Evaluate the results of the problems using expected value, decision trees and utility
theory for decision making in production and service problems.

The activity consists of:

In the Learning environment, consult the bibliographic reference of the Unit 1.

Decision models under risks:

• Sharma, J. (2016). Operations Research: Theory and Applications. (pp. 347-

378), New Delhi: Laxmi Publications Pvt Ltd, v. Sixth edition.

• Aven, T. (2008). Risk Analysis : The Risk Analysis Process: Chichester, UK:
john wiley & sons editorial (pp. 69-82).

Take into account the demands and probabilities to correctly state the decision trees
and the expected values to solve each of the problems and solve the questions asked.

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Exercise 1. DECISION TREES, EVPI and EVMI

A textile company that has a productive experience in the foreign market of 25 years,
must decide if it manufactures a new product in its main plant, or if on the contrary
the purchase from an external supplier. The profits depend on the demand of the
product. The table shows projected profits, in millions of dollars.

Table 1. Decision process for the commercialization of the product

States of nature
Demand low
Decision alternative Demand Demand
average -
low-utility High - utility
utility

Manufacture 421 452 467

Subcontract 435 453 481
Buy 418 461 475
Probabilities Ʃ = 1 0,4 0,25 0,35

According to the corresponding information in Table 1 and the Predicted Value of

Perfect Information (EVPI) theory, the Expected Value of Sample Information (EVMI)
and Decision Trees, respond:

a. Use EVPI to determine if the company should try to get a better estimate of
the demand.

b. A test market study of potential product demand is expected to report a

favorable (F) or unfavorable (U) condition. The relevant conditional
probabilities are:

P(F/low) = 0,3 P(D/low) = 0,7

P(F/low average) = 0,35 P(D/ low average) = 0,65
P(F/high) = 0,4 P(D/high) = 0,6

c. What is the expected value of market research information?

d. What is the efficiency of the information?

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Exercise 2. DECISION TREES, EVPI and EVMI

Fabcom, a company that manufactures electronic components for the introduction in

its product catalog, must decide whether to manufacture a new product in its main
plant, subcontract it with company supervision or if it buys it from an external
supplier. The profits depend on the demand of the product. The table shows projected
profits, in millions of dollars.

According to the corresponding information in Table 2 and the Predicted Value of

Perfect Information (EVPI) theory, the Expected Value of Sample Information (EVMI)
and Decision Trees, respond:

a. Use EVPI to determine if the company should try to get a better estimate of
the demand.

b. A test market study of potential product demand is expected to report a

favorable (F) or unfavorable (U) condition. The relevant conditional
probabilities are:

P(F/low) = 0,25 P(D/low) = 0,75

P(F/low average) = 0,4 P(D/ low average) = 0,6
P(F/high medium) = 0,5 P(D/ high medium) = 0,5
P(F/high) = 0,32 P(D/high) = 0,68

c. What is the expected value of market research information?

d. What is the efficiency of the information?

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Exercise 3. DECISION TREES, EVPI and EVMI

Teratextyl, a textile company that has a productive experience in the foreign market
of 30 years, must decide if it manufactures a new product in its main plant, or if on
the contrary the purchase from an external supplier. The profits depend on the
demand of the product. The table shows projected profits, in millions of dollars.

According to the corresponding information in Table 3 and the Predicted Value of

Perfect Information (EVPI) theory, the Expected Value of Sample Information (EVMI)
and Decision Trees, respond:

a. Use EVPI to determine if the company should try to get a better estimate of
the demand.

b. A test market study of potential product demand is expected to report a

favorable (F) or unfavorable (U) condition. The relevant conditional
probabilities are:

P(F/low) = 0,3 P(D/low) = 0,7

P(F/low average) = 0,4 P(D/ low average) = 0,6
P(F/high medium) = 0,32 P(D/ high medium) = 0,68
P(F/high) = 0,35 P(D/high) = 0,65

c. What is the expected value of market research information?

d. What is the efficiency of the information?

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From the problem situation:

1. Formulate and design the decision trees to apply the expected value according
to the conditions of excercise 1, 2 and 3.

2. Calculate the expected values and efficiencies of the problem according to the
characteristics presented in the problem.

In a spreadsheet (Excel), propose the development and formulation of the cells to

apply the expected value method in the decision trees, design the decision trees and
calculate the expected values according to the conditions of the problem.

3. In Excel QM, find the solution to the problem.

Interpret the results of the expected value solution for decision making according to
the conditions of the trees. Individually, to present in the Discussion Forum (Learning
environment) the advances in the formulation, development, solution, checking of
results and interpretation of results of the problems in spreadsheet (Excel) and Excel
QM.

Collaboratively, the working group must select Exercise 1, Exercise 2 and Exercise 3,
among those presented individually, to review and verify the procedure and
application of the mathematical models and algorithms required for the formulation,
development, solution, verification and interpretation of results to make the
respective adjustments and finally, proceed to the construction of the report in
spreadsheet (Excel) in the Discussion Forum (Learning environment) and deliver it
collaboratively in the Evaluation environment.

For the development of the activity, keep in mind that:

In the Learning environment, you should: Consult and review the agenda of the
course, consult the reference proposed in the required educational resources of Unit
1. Decision models under risks, present in the forum of the activity, the contributions
and progress on development and solving the problems raised above.

In the Evaluation environment, you must: Deliver the report individually according
to its specifications and availability scheduled in the Course Agenda.

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Individual evidence:

The individual evidences to deliver are:

Documents in spreadsheet (Excel) with the development of:

Exercises 1, 2 and 3. Expected value and decision trees:

1. Formulation of the problem as a model of expected value in decision trees.

2. Solution of the model and formulation of decision trees for the calculation of
the expected value according to the conditions of each problem in spreadsheet
(Excel) and Excel QM.
3. Interpretation of results of the expected value model solution for decision
making.

Group evidence:

The group evidences to deliver are:

Document in spreadsheet (Excel) titled Solving problems of decision models under

risks, which must contain the following information and presentation: Cover.
Identifying the activity, the title, the authors, the tutor, the course, the institution,
the school, the program and the year.
Content:

Exercises 1, 2 and 3. Expected value and decision trees:

1. Formulation of the problem as an expected value model.

2. Solution of the decision tree model in spreadsheet (Excel) and Excel QM.
3. Interpretation of results of the expected value model solution and decision
trees for decision making.

Bibliography (with APA standard).

File Extension: xls or pdf

Identification: Task 2. Name of the student.

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 2. General guidelines for the preparation of the evidence to be
delivered.

For individually produced evidence, consider the following guidelines:

1. You must present the progress of the activity in the forum of the activity during
the time allocated for the activity.

2. Before delivering the requested product, you must check that it meets all the
requirements indicated in this activity guide.

Please note that all individual or group written products must comply with the
spelling standards and the defined presentation conditions. Regarding the use of
references, consider that the product of this activity must comply with APA
standards. In any case, comply with the reference standards and avoid academic
plagiarism, for this you can support yourself by reviewing your written products using
the Turnitin tool found on the virtual campus.

Consider that in agreement 029 of December 13, 2013, article 99, the following are
considered as offenses that violate the academic order, among others: literal e)
“Plagiarism, that is, presenting as your own authorship the all or part of a work,
work, document or invention made by another person. It also implies the use of
missing citations or references, or proposing citations where there is no coincidence
between it and the reference ”and liberal f)“ Reproducing, or copying for profit,
educational materials or results of research products, which have intellectual rights
reserved for the University ”

The academic sanctions that the student will face are the following:
a) In cases of academic fraud demonstrated in the academic work or respective
evaluation, the grade to be imposed will be zero points without prejudice to the
corresponding disciplinary sanction.
b) In cases related to plagiarism demonstrated in academic work, whatever its
nature, the grade to be imposed will be zero points, without prejudice to the
corresponding disciplinary sanction.

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 3. Evaluation Rubric Format

Activity type: In group - Collaborative

Time of assessment: Intermediate
The maximum possible score is 100 points
High level: The student develops and presents all the
First evaluation activities proposed in the forum of the activity .
criterion: If your work is at this level you can get between 15
points and 19 points
Use the forum of the
activity to develop Medium Level: The student develops and presents some
and present Task 2. activities proposed in the forum of the activity .
If your work is at this level you can get between 2
This criterion points and 14 points
represents 15
points out of the Low level: The student does not develop and present the
total 100 points of activities proposed in the forum of the activity .
the activity. If your work is at this level you can get between 0
points and 1 points
High level: The student correctly analyzes the expected
Second evaluation value method in the development and solution of decision
criterion: trees in excercise 1, correctly determining all the
requested aspects.
Use the method of If your work is at this level you can get between 19
expected value in the points and 20 points
formulation and
decision tree solution Medium Level: The student partially analyzes the
of excercise 1 to expected value method in the development and solution
make decisions in a of decision trees in excercise 1, partially determining the
process of production requested aspects.
and services. If your work is at this level you can get between 2
points and 18 points
This criterion
represents 20 Low level: The student does not apply the expected
points out of the value method in the development and solution of the
total 100 points of decision tree excercise in excercise 1.
the activity. If your work is at this level you can get between 0
points and 1 points

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 High level: The student correctly analyzes the expected
Third evaluation value method in the development and solution of decision
criterion: trees in excercise 2, correctly determining all the requested
aspects.
Use the method of If your work is at this level you can get between 19
expected value in the points and 20 points
formulation and
decision tree solution Medium Level: The student partially analyzes the expected
of excercise 2 to value method in the development and solution of decision
make decisions in a trees in excercise 2, partially determining the requested
process production aspects.
and services. If your work is at this level you can get between 2
points and 18 points
This criterion
represents 20 Low level: The student does not apply the expected value
points out of the method in the development and solution of the decision tree
total 100 points of excercise in excercise 2.
the activity. If your work is at this level you can get between 0
points and 1 points
High level: The student correctly analyzes the expected
Fourth evaluation value method in the development and solution of decision
criteria: trees in excercise 3, correctly determining all the requested
aspects.
Use the method of If your work is at this level you can get between 19
expected value in the points and 20 points
formulation and
decision tree solution Medium Level: The student partially analyzes the expected
of excercise 3 to value method in the development and solution of decision
make decisions in a trees in excercise 3, partially determining the requested
process production aspects.
and services. If your work is at this level you can get between 2
points and 18 points
This criterion
represents 20 Low level: The student does not apply the expected value
points out of the method in the development and solution of the decision tree
total 100 points of problem in excercise 3.
the activity. If your work is at this level you can get between 0
points and 1 points

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 High level: The student interprets, compares and analyzes
Fifth evaluation
the results according to the expected value methods
criterion:
developed manually and those generated by the Excel QM,
correctly determining all the requested aspects.
Interpret, compare
If your work is at this level you can get between 14
and analyze the
points and 15 points
results according to
the expected value
Medium Level: The student interprets, compares and
methods developed
partially analyzes the expected value methods developed
manually and those
manually and those generated by the Excel QM, determining
generated by the
some requested aspects.
Excel QM.
If your work is at this level you can get between 2
points and 14 points
This criterion
represents 15
Low level: The student does not interpret, compare or
points out of the
analyze the expected value methods developed manually
total 100 points of
and those generated by the Excel QM.
the activity.
If your work is at this level you can get between 0
points and 1 points
High level: The student presents the report with the
development and correct solution of the problems posed,
with excellent writing, spelling, citations and bibliographic
references in accordance with the APA standard in its
Sixth evaluation
content.
criterion:
If your work is at this level you can get between 9
points and 10 points
Report Solution of
expected value
Medium Level: The student presents the report with the
problems and
development and partial solution of the problems posed,
decision trees.
with writing, spelling, citations and / or bibliographic
references in accordance with the APA standard in its
This criterion
content.
represents 10
If your work is at this level you can get between 2
points out of the
points and 8 points
total 100 points of
the activity.
Low level: The student does not present the report with
the development and solution of the problems posed.
If your work is at this level you can get between 0
points and 1 points

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