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Weekly Summary 6

Felipe da Mata (2017726)

Melissa Rasera (2021853)

Olivio Campaner (2011798)

University Canada West

OPMT 620 – Operations Management

Farnoosh Bagheri

MAY 25th, 2021

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in APA format. I acknowledge that I am expected to exercise the utmost academic integrity in

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Weekly Summary 5
Table 1
Chapter 5 Summary
Main Topic Explanation
Decision analysis It is a scientific and systematic tool
for making critical and complex
decisions, being developed by
Professor Ron Howard, from
Stanford University, in the 1960s.
This subject involves evaluating a
better decision alternative in order to
maximize the expected utility after
modeling the decision dilemma.
Decision trees A decision tree is a graphical
representation of choices, random
variables, and their probabilities and
the reward in the form of a tree. The
nodes of a decision tree are organized
in order of incidence over time. The
concept derives from the tree
appearance of the diagram.
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Application/Advantages
When there are many
unknowns, this is a great option.
It can be applied in different
dilemmas in the production of
goods or services, such as
capacity planning, creation of
new products, site planning,
collection of the project
portfolio, contract bids, bank
loans, and medical assistance
are just a few of them. Most
large corporations use this
method of decision-making.
Influence graphs, for example,
can have several differences. It
can have a graphical
representation of a decision
dilemma in a small size. The
data for a one-variable dilemma
can be summarized using payoff
tables, which display the payoff
for each decision choice.
A decision tree is analyzed from
right to left after it is drawn and
the necessary data is obtained.
Choose the option that will
result in the highest payout for
each decision. Calculate the
expected payoff value of the
states of existence of each
displacement node. Keep
analyzing until you find the
right option for each decision.
The strategist would be
involved in distributing the
probability of payment with the
best solution, and the decision-
maker is usually concerned

Expected value of In some instances, it is possible to
perfect information acquire information about the states
of existence of random variables to
measure their probabilities more
accurately and, as a result, make
smarter decisions. For example, a
market study on consumer
perceptions of a new product can be
conducted. Product testing can also
provide details about a product's
technological potential.
The estimated value of perfect
information (EVPI), which is the
difference between the expected
return with perfect information and
the expected return without
information, is the expected increase
in return if the information is perfect.
Sensitivity analysis In a decision dilemma, both the
to probability payoffs and their elements, such as
changes price and expense, and other inputs,
as well as the probabilities, are
approximate values. As a result,
knowing how vulnerable the reward
option of the best alternative to
improvements in one or more of these
values is can be helpful to the
decision-maker.
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about the danger of falling
payments. All of this can be
done using software that
facilitates the process and
makes the results less biased.
EVPI represents the maximum
amount of money that a
decision-maker should be able
to spend on details. As a result,
if the cost approaches EVPI, the
decision-maker will be better
off if he doesn't spend more
money and just choose the
option with the highest expected
return. In most cases, the
available knowledge about a
random variable is insufficient;
in these cases, a mathematical
finding known as the Bayes
Rule must be used to alter the
probability distribution of the
state of existence of the random
variable.
The probability spectrum, for
which an option has the best-
expected return, is known as
sensitivity to a probability.
When there are two states, the
solution seen here is useful. It
involves making a graph and
then using algebra to calculate
the probability spectrum in
which a given alternative is the
safest.
The expected payoff spectrum
of the best option due to the
variation of an entry is known
as sensitivity to an entry. A
value is used to quantify an
input, such as price, quality, or
the quantity in high demand.
The nominal value is the name
given to this best
approximation. However, the

Risk aversion The expected numerical return could
not represent the risk appetite or the
mindset of the decision-maker.
Utilitarianism must be applied in this
situation. A utility is a measure of a
person's worth in terms of different
rewards. Most people are risk averse,
according to research.
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nominal value is only an
approximation and, with this
input, a low to high spectrum
can be calculated.
Since utils have little intuitive
meaning, they are often
converted back to dollars. This
is known as the ist equivalent of
certainty, which is the amount
of money that is guaranteed to
be as desirable as a risky asset
for an investor. Where the value
of a result cannot be calculated
by a single unit, multiple targets
or attributes are used. These
situations are more common in
government departments with
goals that require more than just
money, such as public
protection and environmental
management. If the goal can be
measured, but not in a single
unit, a weighted average of the
scores for each consequence can
be used as a reward.
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References

Stevenson, W., Hojati, M., Cao, J. (2018). Operations Management (6th Canadian ed.).

McGraw-Hill Education.