PHASE 8 – FINAL PROJECT

Presented by:

OIDEN ARIAS
GEOVANNY CANO
OLIVERIOSUARES
RODRIGO MORENO YUNDA
KELI JOHANA YAIME
GUZMAN

GROUP: 212066_13

TUTOR
RICARDO JAVIER PINEDA

UNIVERSIDAD NACIONAL ABIERTA Y A DISTANCIA – UNAD

INDUSTRIAL ENGINEERING PROGRAM
NEIVA-HUILA
2018
 INTRODUCTION

The following work is done in phase 8 of which joins the 3 units that have the

course of decision theories. In this way the content and some useful tools for the

development of the exercises will be known.

The content of this work helps the student to understand the concepts necessary

for decision-making, the criteria that must be taken into account as differentiation

algorithms, their characteristics and applications in different risk and / or

uncertainty environments, for the taking of decisions and the optimization of the

expected results.

Our objective with the development of the work of phase 8 is to review and address

the problems that will be encountered during the development of the course.
Problem 1. Decisions under a risk environment:

A company dedicated to manufacturing different turned parts must

decide whether to manufacture a new product at its main plant, or if it
buys it from an outside supplier. The profits depend on the demand of
the product. Table 10 shows projected profits, in millions of pesos.

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) = 0,2 P(D/low) = 0,8

P(F/low average) = 0,33 P(D/ low average) = 0,64
P(F/high medium) = 0,28 P(D/ high medium) = 0,72
P(F/high) = 0,5 P(D/high) = 0,5

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

d. What is the efficiency of the information?
SOLUCIÓN

EMV
Manufacture:
0,23(35) + 0,21(37) + 0,25(38) + 0,31(40) = 37,72

Subcontract:
0,23(33) + 0,21(35) + 0,25(36) + 0,31(38) = 35,72

Buy:
0,23(38) + 0,21(40) + 0,25(41) + 0.31(43) = 40,72

Lease:
0,23(40) + 0,21(42) + 0,25(43) + 0,31(44) = 42,41

The recommended decision is to subcontract expecting a payment of 42, 41 million

dollars

EVPI
𝑬𝑽𝑷𝑰 = 𝑬𝑽 𝒘 𝑷𝑰 − 𝑬𝑽 𝒘𝒐 𝑷𝑰

𝐸𝑉𝑃𝐼 = 42, 41 − 42,41 = 0

The efficiency is 0%
DECISION TREES:
Probabilities Demand

Low (0,23) 35 8,05

Low average (0,21)

37 7,77
High medium (0,25)
Manufacture nodo 2
Demand high (0,31) 37,72
38 9,50

40 12,40

Low (0,23) 33 7,59

Low average (0,21) 35 7,35

nodo High medium
Subcontract 3 (0,25)
35,72
36 9,00
Demand high (0,31)

38 11,78
Nodo 1
Low (0,23) 38 8,74
Low average (0,21)
High medium 40 8,40
Buy nodo 4 (0,25) 40,72
Demand high (0,31) 41 10,25
LOW ( 0,23)
Low average ( 0,21)
High medium (0,25) 43 13,33
Demand high (0,31)
40 9,20

42 8,82
Nodo 42,41
Lease
5 43 10,75

44 13,64
 FAVORABLE
P (F/low) = 0, 2
P (F/low average) = 0, 33
P (F/high medium) = 0, 28
P (F/high) = 0, 5

FAVORABLE
State of nature Previous probabilities Conditional Joint probabilities Later probabilities
P(Sj) probabilities P(Fn Sj) P(Sj/F)
P(F / Sj)
Low 0,23 0,2 0,04 0,12
Low average 0,21 0,33 0,06 0,18
High medium 0,25 0,28 0,07 0,21
Demand high 0,31 0,5 0,15 0,46
P(F) 0,32
 UNFAVORABLE

P (D/low) = 0, 8
P (D/ low average) = 0, 64
P (D/ high medium) = 0, 72
P (D/high) = 0, 5

UNFAVORABLE
State of nature Previous probabilities Conditional Joint probabilities Later probabilities
P(Sj) probabilities P(Fn Sj) P(Sj/F)
P(F / Sj)
Low 0,23 0.8 0,18 0,28
Low average 0,21 0,64 0,13 0,20
High medium 0,25 0,72 0,18 0,28
high 0,31 0,5 0,15 0,23
P(D) 0,64

EVPI
𝑬𝑽𝑷𝑰 = 𝑬𝑽 𝒘 𝑷𝑰 − 𝑬𝑽 𝒘𝒐 𝑷𝑰
𝑭𝒂𝒗𝒐𝒓𝒂𝒃𝒍𝒆 = 𝟒𝟏, 𝟔𝟑 𝒙 𝟎, 𝟑𝟐 = 𝟏𝟑, 𝟑𝟐
𝑼𝒏𝒇𝒂𝒗𝒐𝒓𝒂𝒃𝒍𝒆 = 𝟒𝟏, 𝟕𝟔 𝒙 𝟎, 𝟔𝟒 = 𝟐𝟔, 𝟕𝟐
𝟏𝟑, 𝟑𝟐 + 𝟐𝟔, 𝟕𝟐 = 𝟒𝟎, 𝟎𝟒

𝐸𝑉𝑃𝐼 = 42,41 − 40,04 = 2,3

The efficiency is 2,3%

 DECISION TREES: FAVORABLE

Low (0,12) 35 4,20

Low average (0,18)

37 6,66
Manufacture Nodo 4 37,24
High medium (0,21)
38 7,98

Demand high (0,46)

40 18,40

Low (0,12) 33 3,96

Low average (0,18)

35 6,30
Subcontract Nodo 5
35,30
High medium (0,21)
36 7,56

0,32 Demand high (0,46)

38 17,48
Nodo 1 favorable Nodo 2
Low (0,12) 38 4,56

Low average (0,18)

40 7,20
Buy Nodo 6
39,15
High medium (0,21)
41 8,61

Demand high (0,46)

43 19,78

Low (0,12) 40 4,80

Low average (0,18)

42 7,56
41,63
Lease Nodo 7
High medium (0,21)
43 9,03

Demand high (0,46)

44 20,24
 DECISION TREES: UNFAVORABLE

Low (0,28) 35 9,80

Low average (0,20)

37 7,40
37,04
Manufacture Nodo 8
High medium (0,28)
38 10,64

Demand high (0,23)

40 9,20

Low (0,28) 33 9,24

Low average (0,20)

35 7,00 35,06
Subcontract Nodo 9
High medium (0,28)
36 10,08

0,64 Demand high (0,23)

38 8,74
Nodo 1 Unfavorable Nodo 3
Low (0,28) 38 10,64

Low average (0,20)

40 8,00
Buy Nodo 10
40,01
High medium (0,28)
41 11,48

Demand high (0,23)

43 9,89

Low (0,28) 40 11,20

Low average (0,20)

42 8,40
Lease Nodo 11
41,76
High medium (0,28)
43 12,04

Demand high (0,23)

44 10,12
Problem 2. Decision in uncertainty:

The company is thinking of acquiring machinery with new technology to carry out
its workshop work. The purchase will be decided according to several alternatives
presented by the seller (adaptability), this to facilitate the implementation in the
workshop. The decision variables presented below represent the cost of adaptation
that will arise after acquiring the machinery and training the workers in their use.
Table 11 shows the costs in millions of currency units per technology.

Event

Fits Fits
Alternative Does not fit Fits well
acceptably successfully

Technology 1 800 810 820 860

Technology 2 900 840 840 820
Technology 3 810 860 880 900
Technology 4 680 810 800 910

Determine the optimal size of the premises to be purchased, using the

methods of LAPLACE, WALD, HURWICZ AND SAVAGE

SOLUTION:
CRITERIA OF LAPLACE:
The Laplace principle consists of alternative 1, alternative 2, alternative 3,
alternative 4, has the same probabilities of happening. The associated probabilities
are 𝑝 (𝑒𝑖)) = 1/4

Alterna 1 = (800 + 810 + 820 + 860)/4 =822

Alterna 2 = (900 + 840 + 840 + 820)/4 = 850
Alterna 3 = (810 + 860 + 880 + 900)/4 = 862
Alterna 4 = (680 + 810 + 800 + 910)/4 = 800

Cuyo rendimiento que más adaptación tuvieron los trabajadores es (862)

especificada por la alternativa 3.
 Wald or pessimistic criterion:

Event

Does not Fits Fits 𝒎𝒂𝒙

Alternative Fits well {𝒙𝒚}
fit acceptably successfully
𝒆𝒋
Technology 1 800 810 820 860 800
Technology 2 900 840 840 820 820
Technology 3 810 860 880 900 810
Technology 4 680 810 880 910 680

You must choose the alternative that provides the highest level of security
possible. The decision rule of Wald is:

𝒎𝒂𝒙 {𝒙𝒚}
= 𝟖𝟐𝟎
𝒆𝒋

The technology that we would implement in the criterion of Wald or pessimist is the
TECHNOLOGY 2.

Optimal wald criterion:

Event

Does not Fits Fits 𝒎𝒂𝒙

Alternative Fits well {𝒙𝒚}
fit acceptably successfully
𝒆𝒋
Technology 1 800 810 820 860 860
Technology 2 900 840 840 820 900
Technology 3 810 860 880 900 900
Technology 4 680 810 880 910 910

La tecnología que implantaríamos en el criterio de wald e optimista es la

TECNOLOGIA 4.
Hurwicz Criterion:
To apply this decision criterion, the decision maker must define its coefficient of
optimism α between 0 and 1.
Consequently, the pessimism coefficient will be (1-α)
𝒗𝒂𝒍𝒐𝒓 𝒆𝒔𝒑𝒆𝒓𝒂𝒅𝒐 (𝑨𝒊) = {𝑴𝒂𝒙 𝑹𝒊𝒋 ∗ 𝜶 + 𝒎𝒊𝒏 𝑹𝒊𝒋 ∗ (𝟏 − 𝜶)}

Event

Fits Fits
Alternative Does not fit Fits well
acceptably successfully

Technology 1 800 810 820 860

Technology 2 900 840 840 820
Technology 3 810 860 880 900
Technology 4 680 810 800 910

𝐴1 = 860𝑥 0.65 + 800𝑥(1 − 0.65) = 839,0

𝐴2 = 900𝑥 0.65 + 820𝑥(1 − 0.65) = 872,0
𝐴3 = 900𝑥 0.65 + 810𝑥(1 − 0.65) = 868,5
𝐴4 = 910𝑥 0.65 + 680𝑥(1 − 0.65) = 829,5
Por lo tanto implementamos la tecnología 2.
Criterios of savage:
Next, we will select for each alternative, the maximum opportunity cost that can be incurred, of which, we will choose the
minimum.

Event

Fits Fits
Alternative Does not fit Fits well
acceptably successfully
Technology 1 900-800=100 860-810=50 880-820=60 910-860=50 100
Technology 2 900-900=0 860-840=20 880-840=40 910-820=90 90
Technology 3 900-810=90 860-860=0 880-880=0 910-900=10 90
Technology 4 900-680=220 860-810=50 880-880=0 910-910=0 220

Therefore we implement the technology of lower cost that is the TECHNOLOGY 2 and 3 that has a cost of 90
million pesos
Problem 3. Decision in uncertainty:
PLAYER B
65 82 72 65 68

PLAYER A
78 89 56 89 81
92 86 83 64 72
89 88 76 67 75
67 59 89 65 79

Find the saddle point of the data given below in table 12 for players A
and B.
Solution:
Problem 4. Decision in uncertainty:
In order to determine the decision conditions in the market, the Game
Theory will be used, using the graphical solution of the type (2 x N) and
(2 x M) to estimate the strategy and value of the game for the following
data:

ESTRATEGIA MAXIMIN ≠ MINIMAX

Q1 Q2 Suma
1 0 1,00

player 2 MINIMO Vesperado MinZ= V

a b
1

P1 1,00 5 6 5 0,0 0
PLAYER 1

P2 0,00 4 3 3 0
Suma
1,00
MAXIMO 5 6

valor esperado 0 0

MaxZ= V 0
Problem 5. Markov decision problem:

An insurance company charges its customers according to their accident history. If you have not had accidents the last
two years are charged US $ 6000 (State 1); If you have had an accident in each of the last two years you will be charged $
6300 (State 2). If you had accidents the first of the last two years US $ 5800 (State 3). The probabilities of the state
according to historical data of three years are:

STATES E1 E2 E3
E1 0,20 0,30 0,50
E2 0,25 0,35 0,40
E3 0,20 0,15 0,65

Determine what the average payment that the company will receive according to the data in the table.
SOLUTION:

STATES E1 E2 E3 TOTAL
E1 0,20 0,30 0,50 1,00
E2 0,25 0,35 0,40 1,00
E3 0,20 0,15 0,65 1,00

STATES E1 E2 E3 TOTAL
E1 0,20 0,3 0,50 1
E2 0,25 0,35 0,40 1
E3 0,20 0,15 0,65 1
 1 1 2
Matriz de probabilidades de
transición

W 0,20 0,30 0,50 1,00

X P= 0,25 0,35 0,40 1,00 q=WXY
Y 0,20 0,15 0,65 1,00

W X Y INDEP
-0,80 0,25 0,20 0 E1 E2 E3
0,30 -0,65 0,15 0 W X Y
0,50 0,40 -0,35 0 0,2113565 0,2271293 0,5615142
1,00 1,00 1,00 -1

E1 6.000 1268,1388 W
E2 6.300 1430,9148 X
E3 5.800 3256,7823 Y
TOTAL 5955,836
Problem 6. Markov decision problem:
Suppose you get 6 types of Jeans brands in the Colombian market:
Brand 1, Brand 2, Brand 3, Brand 4, Brand 5 and Brand 6. The following
table shows the odds that you continue to use the same brand or
change it.

STATE BRAND 1 BRAND 2 BRAND 3 BRAND 4 BRAND 5 BRAND 6

BRAND 1 0,21 0,18 0,13 0,23 0,15 0,1
BRAND 2 0,13 0,16 0,2 0,14 0,19 0,18
BRAND 3 0,15 0,14 0,17 0,16 0,15 0,23
BRAND 4 0,16 0,16 0,15 0,19 0,17 0,17
BRAND 5 0,16 0,19 0,13 0,14 0,16 0,22
BRAND 6 0,15 0,19 0,16 0,18 0,15 0,17

At present, brand, have the following percentages in market share

respectively (19%, 18%, 17%, 15%, 19% y 12%) during week 4.

SOLUSION:
E0
STATE BRAND 1 BRAND 2 BRAND 3 BRAND 4 BRAND 5 BRAND 6 SUMA
BRAND 1 0,21 0,18 0,13 0,23 0,15 0,1 1
BRAND 2 0,13 0,16 0,2 0,14 0,19 0,18 1
BRAND 3 0,15 0,14 0,17 0,16 0,15 0,23 1
BRAND 4 0,16 0,16 0,15 0,19 0,17 0,17 1
BRAND 5 0,16 0,19 0,13 0,14 0,16 0,22 1
BRAND 6 0,15 0,19 0,16 0,18 0,15 0,17 1

BRAND 1 BRAND 2 BRAND 3 BRAND 4 BRAND 5 BRAND 6

P0
19 18 17 15 19 12

During week 4.
E1
STATE BRAND 1 BRAND 2 BRAND 3 BRAND 4 BRAND 5 BRAND 6
BRAND 1 0,163 0,169 0,155 0,177 0,163 0,172
BRAND 2 0,158 0,170 0,157 0,170 0,161 0,184
BRAND 3 0,159 0,171 0,157 0,174 0,160 0,179
BRAND 4 0,160 0,170 0,156 0,174 0,162 0,178
BRAND 5 0,159 0,172 0,158 0,173 0,162 0,177
BRAND 6 0,159 0,169 0,158 0,173 0,163 0,179

BRAND 1 BRAND 2 BRAND 3 BRAND 4 BRAND 5 BRAND 6

P1
16,12 16,97 15,6 17,28 16,21 17,82

E2
STATE BRAND 1 BRAND 2 BRAND 3 BRAND 4 BRAND 5 BRAND 6
BRAND 1 0,1598 0,1702 0,1568 0,1735 0,1619 0,1778
BRAND 2 0,1594 0,1704 0,1571 0,1732 0,1618 0,1781
BRAND 3 0,1595 0,1702 0,1571 0,1733 0,1619 0,1780
BRAND 4 0,1595 0,1703 0,1570 0,1733 0,1619 0,1780
BRAND 5 0,1594 0,1702 0,1571 0,1732 0,1620 0,1782
BRAND 6 0,1595 0,1702 0,1570 0,1732 0,1619 0,1782

BRAND 1 BRAND 2 BRAND 3 BRAND 4 BRAND 5 BRAND 6

P2
15,96 17,03 15,69 17,34 16,19 17,79
 E3
STATE BRAND 1 BRAND 2 BRAND 3 BRAND 4 BRAND 5 BRAND 6
BRAND 1 0,15954 0,17025 0,15699 0,17330 0,16190 0,17802
BRAND 2 0,15951 0,17024 0,15702 0,17327 0,16190 0,17806
BRAND 3 0,15952 0,17025 0,15700 0,17328 0,16189 0,17806
BRAND 4 0,15952 0,17025 0,15700 0,17328 0,16190 0,17805
BRAND 5 0,15951 0,17025 0,15700 0,17328 0,16189 0,17807
BRAND 6 0,15951 0,17025 0,15701 0,17328 0,16189 0,17805

BRAND 1 BRAND 2 BRAND 3 BRAND 4 BRAND 5 BRAND 6

P3
15,952 17,025 15,700 17,329 16,190 17,804

E4
STATE BRAND 1 BRAND 2 BRAND 3 BRAND 4 BRAND 5 BRAND 6
BRAND 1 0,159519 0,170248 0,157004 0,173284 0,161895 0,178049
BRAND 2 0,159517 0,170249 0,157005 0,173282 0,161894 0,178053
BRAND 3 0,159518 0,170249 0,157005 0,173283 0,161894 0,178051
BRAND 4 0,159518 0,170249 0,157005 0,173283 0,161895 0,178051
BRAND 5 0,159517 0,170249 0,157005 0,173283 0,161894 0,178051
BRAND 6 0,159518 0,170248 0,157005 0,173283 0,161895 0,178052

BRAND 1 BRAND 2 BRAND 3 BRAND 4 BRAND 5 BRAND 6

P4
15,9518 17,0249 15,7004 17,3283 16,1895 17,8051
SOLUSION:

• For the fourth period, the probability that a person remains with the brand of
Colombian jeans brand 1 is 15.95% and has the possibility to change the brand
2 is 17.02%, 15.70% mark 3 and 17.32% to mark 4 and if they want change the
5 mark, the possibility is 16.18% and the 6 mark is 17.80%.

• People who remain with the Brand 2 brand have a 17.02% that continues with
this product, a 15.95% that changes to Brand 1, a 15.70% that changes to Brand 3
and a 17.32% that changes to Brand 4 and that remains with the brand Brand 5 is
16.18% and the brand Brand 6 is 17.80%.

• When a person remains with the Brand 5 brand, it has a 16.18% that continues
with the brand, a change of 15.95% in Brand 1, a change of 17.02% in Brand 2
and a change of 15.70% in Brand Brand 3 and a change Brand 4 is 17.32% and
17.80% is brand 6.

• When the person keeps the mark of the brand 6, it has 17.80% that continues
with the brand, 15.95% that changes to the brand 1, 17.02% that changes to the
brand 2 and 15.70% that changes the changes to the brand 3 and 17.32% to
Brand 4 and Brand Brand 5 is 16.18%.

SCREEN SHOTS:
 CONCLUSIONS

• Markov chains are based on the fact that the probability of an event
occurring depends on the previous immediate event.

• In the development of the final work of the decision process of MARKOV, it

provides us with a useful and practical system to create and implement decision-
making processes that bring us closer to possible scenarios in order to be used to
predict evolution with greater precision. And the future behavior of certain
systems in our environment.

• Knowledge was acquired for the performance of the Theory of Decisions

course and thus impractical every knowledge, as Engineers with the ability to
solve problems that arise.
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 Pineda, R. (2017). Virtual learning object Unit 3. Markov decision processes.

[Video File]. Retrieved on May, 2018 from http://hdl.handle.net/10596/13271