Task 6 - Solving problems of decision and optimizatio

and Markov chains

Jorge Fern

Universidad Nacional Abierta y a Distanc

Escuela de Ciencias Bá sicas, Tecnología e Ing
Theory of Decisions-212066_15

Andrea Del Pilar Lopez

Abril de 2021
of decision and optimization of risk, uncertainty

Jorge Ferney García

Nacional Abierta y a Distancia UNAD

s Bá sicas, Tecnología e Ingeniería-ECBTI
ry of Decisions-212066_15

Andrea Del Pilar Lopez

Abril de 2021
 Table 2. Decision process for the commercializati
Decision alternative Demand
low-utility
Manufacture 514
Subcontract 515
Buy 533
Lease 540
Leasing 541
Probabilities Σ=1 0.31
According to the corresponding information in Table 2 and the Predicted Value of Perfect In
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.

Product (Decisión)
The expected value without perfect information (VEsIP) indicates that the deci

VEIP Predicted value of perfect information

VEIP= Valor absoluto (VEcIP -
VEIP= 3.21

Answer a) The predicted Value o

b. A test market study of potential product demand is expected to report a favorable (F) or unfavora
probabilities are:

FAVORABLE

STATE OF NATURE(Ai) PREVIOUS PROBABILITIES P(Ai)

Sumatoria igual a 1
P(F/bajo) 0.31
P(F/medio bajo) 0.29
P(F/alto medio) 0.24
P(F/alto) 0.16
1

UNFAVORABL

STATE OF NATURE(Ai) PREVIOUS PROBABILITIES P(Ai)

STATE OF NATURE(Ai) PREVIOUS PROBABILITIES P(Ai)

Sumatoria igual a 1
P(D/bajo) 0.31
P(D/medio bajo) 0.29
PD/alto medio) 0.24
P(D/alto) 0.16
1

FAVORABLE

0.3159
PRODUCTO

0.6841

UNFAVORABLE
 UNFAVORABLE

VEIM Predicted value of perfect informatio

VEIM Valor absoluto (VEcIM
VEIM 0
VEIM 560.06

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

IS ZERO

d. What is the efficiency of the information?

EFFICIENCY

E= VEM
VEP

NO IN-DEPTH STUDY IS NECESSARY, THE BEST CHOICE IS LASE

ss for the commercialization of the product
Low-average - utility High medium - High - demand utility
demand utility537
demand
572 558
565 518 530
512 519 538
562 579 567
526 512 513
0.29 0.24 0.16
edicted Value of Perfect Information (EVPI) theory, the Expected Value of

estimate of the demand.

0.31 514 159.34

0.29 572 165.88

Manufacture
0.24 537 128.88

0.16 558 89.28

0.31 515 159.65

0.29 565 163.85

Subcontract
0.24 518 124.32

0.16 530 84.8

0.31 533 165.23

0.29 512 148.48

Buy
0.24 519 124.56

0.16 538 86.08

0.31 540 167.40

 0.29 562 162.98
Lease
0.24 579 138.96

0.16 567 90.72

0.31 541 167.71

0.29 526 152.54

Leasing
0.24 512 122.88

0.16 513 82.08

Probability Demand P*D

indicates that the decision to make is to Lease with a value expected of 560,06 millions od dolla

mation
VEsIP)

predicted Value of Perfect information is 3,21 Millions of dollars

t a favorable (F) or unfavorable (U) condition. The relevant conditional

FAVORABLE

CONDITIONAL PROBABILITIES LATER PROBABILITIES

P(F/Ai) Joint probabilities p(FnA) P(Ai/F
se aplica regla de
Sumatoria igual a P(F) Bayes
0.3 0.093 0.294396961063628
0.33 0.0957 0.302943969610636
0.25 0.06 0.189933523266857
0.42 0.0672 0.212725546058879
P(F) 0.3159 1

UNFAVORABLE

CONDITIONAL PROBABILITIES LATER PROBABILITIES

P(D/Ai) Joint probabilities p(DnA) P(Ai/D)
CONDITIONAL PROBABILITIES LATER PROBABILITIES
P(D/Ai) Joint probabilities p(DnA) P(Ai/D)
se aplica regla de
Sumatoria igual a P(F) Bayes
0.7 0.217 0.317205086975588
0.67 0.1943 0.284022803683672
0.75 0.18 0.263119426984359
0.58 0.0928 0.135652682356381
P(D) 0.6841 1

0.294396961 514

0.30294397 572
Manufacture
0.189933523 537

0.212725546 558

0.294396961 515

0.30294397 565
Subcontract
0.189933523 518

0.212725546 530

0.294396961 533

0.30294397 512
Buy
0.189933523 519

0.212725546 538

0.294396961 540

0.30294397 562
Lease
0.189933523 579

0.212725546 567

0.294396961 541

0.30294397 526
Leasing
0.189933523 512

0.212725546 513

Probability Demand

0.317205087 514

0.284022804 572
Manufacture
0.263119427 537

0.135652682 558

0.317205087 515

0.284022804 565
Subcontract
0.263119427 518

0.135652682 530

0.317205087 533

0.284022804 512
Buy
 0.263119427 519

0.135652682 538

0.317205087 540

0.284022804 562
Lease
0.263119427 579

0.135652682 567

0.317205087 541

0.284022804 526
Leasing
0.263119427 512

0.135652682 513

Probability Demand

d value of perfect information

(VEcIM - VEsIM)

_ 560.06

information?
 0 0%
3.21

THE BEST CHOICE IS LASE

543.38

532.62

VEsIP
541
572
524.35 579
560.06
567
Largest valu
 560.06

525.21

Sum

0,06 millions od dollars.

dollars
 151.32

173.283951
545.30
101.994302

118.700855

151.614435

171.163343
533.90788
98.3855649

112.744539

156.91

155.107313
525.04
98.5754984

114.446344

158.97 IF THE STUDY IS FAVORABLE WE MUST LASE

170.254511
 559.82 176.8458
109.97151

120.615385

159.27

159.348528
524.99
97.2459638

109.128205

P*D Sum

VEcIM

163.04 560.06
EXPECTED VALUE OF SAMPLE
162.461044
542.49
141.295132

75.6941966

163.36062

160.472884
532.02529
136.295863

71.8959215

169.07

145.419676
524.03
136.558983

72.9811429

171.29

159.620816
560.17 383.2142
152.346148

76.9150707 IF THE STUDY IS UNFAVORABLE, WE MUST LASE

171.61

149.395995
525.31
134.717147

69.5898259

P*D Sum
 VEcIP
541 167.71
572 165.88
579 138.96 563.27

567 90.72
Largest value of each state of nature
XPECTED VALUE OF SAMPLE INFORMATION
MUST LASE
Exercise 2. Criteria laplace, wald or pessimistic, optimistic, Hurwicz and Savage (Cost Matr
A company that manufactures electronic components for introduction into its product catalog, yo
decide whether to manufacture a new product in your main plant, subcontracting it with the sup
company or if itpurchase from a third-party vendor. The benefits depend on the demand of the p
shows the projected costs, in millions of dollars.

EVENT
ALTERNATIVE Does not Fits Fits
fit acceptably Successfully
TECHNOLOGY 1 536 527 572
TECHNOLOGY 2 546 557 548
TECHNOLOGY 3 567 560 518
TECHNOLOGY 4 532 541 527
TECHNOLOGY 5 546 517 557
TABLE 2. COST MATRIX

1. Laplace
P(j) (1/5) (1/5) (1/5)
Does not Fits Fits
ALTERNATIVE
fit acceptably Successfully
TECHNOLOGY 1 536 527 572
TECHNOLOGY 2 546 557 548
TECHNOLOGY 3 567 560 518
TECHNOLOGY 4 532 541 527
TECHNOLOGY 5 546 517 557

Answer: The best alternative according to the criteria of the place is to invest in technology 5

2. Wald or pessinmistic Minimax

ALTERNATIVE Does not Fits Fits
fit acceptably Successfully
TECHNOLOGY 1 536 527 572
TECHNOLOGY 2 546 557 548
TECHNOLOGY 3 567 560 518
TECHNOLOGY 4 532 541 527
TECHNOLOGY 5 546 517 557

Answer: The best alternative according to the pessimistic criterion is to invest in tec

3. Optimistic criteria Minimin

ALTERNATIVE Does not Fits Fits
fit acceptably Successfully
TECHNOLOGY 1 536 527 572
TECHNOLOGY 2 546 557 548
TECHNOLOGY 3 567 560 518
TECHNOLOGY 4 532 541 527
TECHNOLOGY 5 546 517 557

Respuesta: La mejor alternativa según el criterio optimista es invertir en la techn

4. Hurwicz

Hurwichz coefficient α
Optimistic coefficient 0.7
Pessimistic coefficient 0.3
1

EVENT
ALTERNATIVE Does not Fits Fits
fit acceptably Successfully
TECHNOLOGY 1 536 527 572
TECHNOLOGY 2 546 557 548
TECHNOLOGY 3 567 560 518
TECHNOLOGY 4 532 541 527
TECHNOLOGY 5 546 517 557

Answer: The best alternative according to Hurwicz criteria is to invest in techno

5. Savage
Does not Fits Fits
ALTERNATIVE
fit acceptably Successfully
TECHNOLOGY 1 536 527 572
TECHNOLOGY 2 546 557 548
TECHNOLOGY 3 567 560 518
TECHNOLOGY 4 532 541 527
TECHNOLOGY 5 546 517 557
 Min COLUM 532 517 518

EVENT
Does not Fits Fits
ALTERNATIVE
fit acceptably Successfully
TECHNOLOGY 1 4 10 54
TECHNOLOGY 2 14 40 30
TECHNOLOGY 3 35 43 0
TECHNOLOGY 4 0 24 9
TECHNOLOGY 5 14 0 39

Answer: The best alternative according to the savage criteria is to invest in technology
stic, Hurwicz and Savage (Cost Matrix)
troduction into its product catalog, you will need to
n plant, subcontracting it with the supervision of the
nefits depend on the demand of the product. The table

EVENT
Fits Well Fits Very Well

526 549
540 562
538 539
568 539
555 524
RIX

ace
(1/5) (1/5)
Fits Well Fits Very Well Promedio VAL. MINIMO

526 549 542 540

540 562 551
538 539 544
568 539 541
555 524 540

e place is to invest in technology 5

mistic Minimax
Fits Well Fits Very Well Min valor

526 549 572 557

540 562 562
538 539 567
568 539 568
 555 524 557

ssimistic criterion is to invest in technology 5

eria Minimin
Fits Well Fits Very Well Menor valor

526 549 526 517

540 562 540
538 539 518
568 539 527
555 524 517

rio optimista es invertir en la technology 5

wicz

T
Fits Well Fits Very Well Min valor

526 549 572 557

540 562 562
538 539 567
568 539 568
555 524 557

rwicz criteria is to invest in technology 5

Matriz de
Fits Well Fits Very Well costo
526 549
540 562
538 539
568 539
555 524
 526 524

Fits Well Fits Very Well MAX FILA MIN

0 25 54 39
14 38 40
12 15 43
42 15 42
29 0 39

e criteria is to invest in technology 5

 Ejercicio 3. Cadena Markov (Estado estable):

XYZ insurance company charges its clients according to their accident history. If you have not h
1,130,000 (status 0); if you have had an accident in each of the last two years, you will be charg
you will be charged $ 1,690,000 (state 2) and if you had an accident the second of the last two y
will be charged $ 789,000 ( State 4). The historical behavior of each state is given by the followi

ESTADOS E0 E1 E2 E3 E4
E0 3796 3504 3547 3899 3648
E1 4249 3219 3179 3563 3280
E2 3984 3821 3834 3989 3935
E3 3956 3929 3623 4260 3724
E4 3788 4191 3527 3587 3628

Convert states in proportions or probabilities

ESTADOS E0 E1 E2 E3 E4
E0 0.20637 0.19050 0.19283 0.21197 0.19833
E1 0.24294 0.18405 0.18176 0.20372 0.18754
E2 0.20365 0.19532 0.19598 0.20391 0.20115
E3 0.20296 0.20157 0.18587 0.21855 0.19105
E4 0.20234 0.22387 0.18840 0.19160 0.19379

Determine the matrix of transition probabilities

Transition matrix

-0.79363 0.24294 0.20365 0.20296 0.20234 ⁼

0.1905 -0.7976604 0.19532 0.20157 0.22387 ⁼
0.19283 0.18176 -0.80402 0.18587 0.1884 ⁼
0.21197 0.20372 0.20391 -0.78145 0.1916 ⁼
0.19833 0.18754 0.20115 0.19105 -0.80621 ⁼

E0 If you have not had an accident in the last two years, you will be charged for the new policy
E1 If you have had an accident in each of the last two years you will be charged
E2 If you had accidents the first of the last two years, you will be charged
E3 If you had an accident the second of the last two years you will be charged
E4 They are new customers they will be charged
 E0 E1 E2 E3 E4
U W X Y Z
0.2116 0.1989 0.1889 0.2062 0.1943

U W X Y Z INDEPE
-0.8 0.2 0.2 0.2 0.2 0
0.2 -0.8 0.2 0.2 0.2 0
0.2 0.2 -0.8 0.2 0.2 0
0.2 0.2 0.2 -0.8 0.2 0
0.2 0.2 0.2 0.2 -0.8 0
1 1 1 1 1 -1

u 0.2116 $ 1,130,000
W 0.1989 $ 1,178,000
X 0.1889 $ 1,690,000
Y 0.2062 $ 897,000
Z 0.1943 $ 789,000
story. If you have not had accidents in the last two years, you will be charged for the new policy $
ears, you will be charged $ 1,178,000 (State 1); If you had accidents the first of the last two years
econd of the last two years you will be charged $ 897,000 (State 3) and they are new clients you
is given by the following accident cases, taken in five different events.

TOTAL
18394
17490
19563
19492
18721

SUMA Q= {U W X Y Z} P=
1.0
1.0 (1X5) (5X5)
1.0
1.0
1.0
EC1 0,20637 U
EC2 0,19050 U
EC3 0,19283 U
EC4 0,21197 U
EC5 0,19833 U
EC6 U
1
1
1 EC1 0.20637
1 EC2 0,19050 U
1 EC3 0,19283 U
EC4 0,21197 U
EC5 0,19833 U
for the new policy $ 1,130,000 EC6 U
ged $ 1,178,000
$ 1,690,000
d $ 897,000 EC1 -0.79363
$ 789,000 EC2 0.1905
 EC3 0.19283
EC4 0.21197
EC5 0.19833
EC6 1 U

0.00
0.00
0.00
0.00
0.00
0.00

$ 1,130,000 $ 239,108
$ 1,178,000 $ 234,304
$ 1,690,000 $ 319,241
$ 897,000 $ 184,961
$ 789,000 $ 153,303
$ 1,130,917
 0.20637 0.19050 0.19283 0.21197 0.19833
0.24294 0.18405 0.18176 0.20372 0.18754
0.20365 0.19532 0.19598 0.20391 0.20115
0.20296 0.20157 0.18587 0.21855 0.19105
0.20234 0.22387 0.18840 0.19160 0.19379

0,24294 W 0,20365 X 0,20296 Y 0,20234 Z⁼

0,18405 W 0,19532 X 0,20157 Y 0,22387 Z⁼
0,18176 W 0,19598 X 0,18587 Y 0,18840 Z⁼
0,20372 W 0,20391 X 0,21855 Y 0,19160 Z⁼
0,18754 W 0,20115 X 0,19105 Y 0,19379 Z⁼
W X Y Z⁼

0,24294 W 0,20365 X 0,20296 Y 0,20234 Z ⁻

0.18405 0,19532 X 0,20157 Y 0,22387 Z ⁻
0,18176 W 0.19598 0,18587 Y 0,18840 Z ⁻
0,20372 W 0,20391 X 0.21855 0,19160 Z ⁻
0,18754 W 0,20115 X 0,19105 Y 0.19379 ⁻
W X Y Z

0.24294 0.20365 0.20296 0.20234

-0.81595 0.19532 0.20157 0.22387
0.18176 -0.80402 0.18587 0.1884
0.20372 0.20391 -0.78145 0.1916
0.18754 0.20115 0.19105 -0.80621
1 W 1 X 1 Y 1 Z
U
W
X
Y
Z
1

1U ⁼ 0
1W ⁼ 0
1X ⁼ 0
1Y ⁼ 0
1Z ⁼ 0
1⁼ 0

0⁼ 0
0⁼ 0
0⁼ 0
0⁼ 0
0⁼ 0
1⁼ 0
Ejercicio 4. Cadenas Markov (Multiplicación inicial del estado):

In Colombia there are 6 main internet operators such as Tigo, Claro, Movistar, ETB, Uff and Azteca that we w
call states. The following graph summarizes the probabilities that each client has of staying with their curre
operator or making a change of company. The current percentages of each operator in the current market ar
Tigo 0.15 for Claro 0. 2, for Movistar 0. 15, for ETB 0. 25, for Uff 0.1 and 0.15 for Azteca (initial state).

Estado Tigo Claro Movistar ETB UFF Azteca

Tigo 0.12 0.21 0.17 0.17 0.11 0.22
Claro 0.17 0.14 0.2 0.13 0.11 0.25
Movistar 0.18 0.21 0.18 0.15 0.19 0.09
ETB 0.13 0.1 0.2 0.07 0.28 0.22
UFF 0.19 0.21 0.17 0.13 0.11 0.19
Azteca 0.12 0.23 0.11 0.15 0.19 0.2

Segú n la Tabla aplicando los criterios de Markov:

• According to matrix multiplication - vectors find state 7 of the problem according to the initial state of pro
• According to matrix - vector multiplication, find state 9 of the problem according to the initial state of prob

q0= 0.15 0.2 0.15 0.25 0.1 0.15

0.12 0.21 0.17 0.17 0.11 0.22

0.17 0.14 0.2 0.13 0.11 0.25
0.18 0.21 0.18 0.15 0.19 0.09
p=
0.13 0.1 0.2 0.07 0.28 0.22
0.19 0.21 0.17 0.13 0.11 0.19
0.12 0.23 0.11 0.15 0.19 0.2

q1 0.1485 0.1715 0.176 0.127 0.1765 0.2005

q2 0.15276 0.188035 0.168685 0.13585 0.16171 0.19296

q3 0.15220105 0.18575325 0.1698258 0.1351923 0.1620261 0.1950015

q4 0.15217096 0.18602615 0.16962653 0.13527305 0.16216888 0.19473443

q5 0.15218345 0.18599282 0.16965118 0.13525767 0.1621453 0.19476958

q6 0.15218146 0.18599755 0.16964785 0.13526029 0.16214747 0.19476538

q7 0.15218167 0.18599685 0.16964829 0.13525991 0.16214731 0.19476597

q8 0.15218165 0.18599695 0.16964823 0.13525996 0.16214733 0.19476589

q9 0.15218165 0.18599694 0.16964824 0.13525995 0.16214732 0.1947659

 ETB, Uff and Azteca that we will
has of staying with their current
erator in the current market are for
or Azteca (initial state).

TOTAL
1
1
1
1
1
1

rding to the initial state of probabilities.

rding to the initial state of probabilities, following the sequence of state 7.

RTA
RTA
Ejercicio 5. Método de Teoría del Juego:
Graphical solutions are only applicable to games where at least one of the players has only two
strategies. Consider the following game of 2 x n:

PLAYER 2
ESTRATEGIA
A B
I 19 17
PLAYER 1
II 27 11
Minimax 27 17
17

PLAYER 2
ESTRATEGIA
A B
I 19 17
PLAYER 1
II 27 11
y1 y2
27 17

We must find an expected payout for player 1 depending on player 2's strategy

Pure strategy player 2 Expected payback player 1

A PE_A=19X1+17X2 19x1+27(1-x1)

B PE_B=17X1+11X2 17x1+11(1-x1)

C PE_C=15X1+23X2 15x1+23(1-x1)

The shaded region is the region the minimun expected payments are.

the maximun point of the minima is at the intersection of aquations PE_B and PE_C

To get the cut-off pount, the equations are equalized

PE= 6x1+11=˗8X1+23 x1+x2=1
x2=1-x1
14x1=23-11 x2=1-12/14
14x1=12
x1=12/14 0.857142857142857 X2=1/7
x1=6/7
We must calculate the expected value of the game

VE=(-8X1+27)*Y1+(6x1+11)*Y2+(˗8X1+23)*Y3

The other condition is: y1+y2+y3=1

But the region is delimited by strategy 2 and strategy3, that is, strategy 1 is not in the game
Y1=0

The volue of the game is: VE=(6x1+11)*Y2+(˗8X1+23)*Y3

PE_B=6*(6/7)+11=113/7 16.1428571428571

It turns out that:

VE=(6X1+11)*Y2+(˗8X1+23)*Y3 VE=

Since the equation depend X1, values are assined to X1

Y1+Y2+Y3=1 Y1=0
X1=0
11Y2+23Y3=113/7 11Y2=(113/7)-23Y3 Y2= ((113/7)-23Y3)/11
Y2+Y3=1-->Y2=1-Y3
Y2= ((113/7)-23Y3)/11
1-Y3=((113/7)-23Y3)/11
Y3=4/7
Y2=3/7

The probabilities of the strategy for each player are:

strategy 1: 6/7
Player 1:
Strategy 2: 1/7

Strategy 1: 0
Player 2: Strategy 2: 4/7
Strategy 3: 3/7
ers has only two

PLAYER 2 Maximin
C
15 15 15
23 11
23
No saddle point

PLAYER 2
C
15 x1 15
23 x2 X2=1-X1 11
y3
23

x=0 x=1

˗8X1+27 27 19

6x1+11 11 17

˗8X1+23 23 15
 0.142857

in the game

16.1428571

Y2+Y3=1
 Bibliography

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

650-665), New Delhi: Laxmi Publications Pvt Ltd, v. Sixth edition.
Retrieved from http://bibliotecavirtual.unad.edu.co/login?
url=http://search.ebscohost.com/login.aspx?
direct=true&db=nlebk&AN=1950625&lang=es&site=eds-
live&scope=site&ebv=EB&ppid=pp_C

Piunovskiy, A. (2012). Examples In Markov Decision Processes:

Singapore: Imperial College Press Optimization Series (pp. 111-127).
Retrieved from http://bibliotecavirtual.unad.edu.co:2051/login.aspx?
direct=true&db=nlebk&AN=545467&lang=es&site=eds-live