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# 02.01.

2012

Management Functions Quantitative Methods in Social Sciences Module for Intro. to Business Administration

Decision Making

## Decision Making: Methods

Quantitative Methods
Qualitative Methods

## Quantitative Methods Related Courses

Calculus Statistics Econometrics Business Forecasting Management Science Decision Theory Operations Research

Modeling Concept
Verbal Mathematical Set of points that have equal distance (radius) from a certain point (center). Verbal Mathematical

Modeling Concept
Individuals consume more goods and services when increase in revenue. C = a + bYd

X2+y2=r2

Graphical

Graphical

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Quantitative Methods
Stochastic Methods
Situations where next stage is probabilistic Statistical Methods

Stochastic Methods
Descriptive Statistics Data Analysis
Regression Trend Analysis

Deterministic Methods
Situations where next stage is certain Decision making under certainty

## Methods Involve Uncertainty

Situations where next stage is uncertain Decision making under uncertainty

Deterministic Methods
Linear Programming Integer Programming Network Analysis
CPM/PERT Shortest Path Maximum/minimum Flow Transportation and Assignment

## Basic Statistical Methods

Data Summarization Frequency distributions Histograms Crosstab Analysis Probability Distributions Sampling

## Descriptive Statistics: Summarization

Descriptive Statistics GPA Levels
95% Confidence Level N Means Std. Deviation Std. Error Lower Limit Upper Limit Min Max

Descriptive Statistics
Frequency Table Histogram

Freshman

132

2,53

,507

,090

2,35

2,71

Junior

148

2,38

,599

,049

2,28

2,48

Senior

120

2,06

,639

,058

1,94

2,17

Total

300

2,27

,630

,036

2,20

2,34

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Crosstabs
Dept*Motivation Crosstab Before Midterm Exam Motivation Total Low Count BA % Dept % Total Count Dept ECN % Dept % Total Count THM % Dept % Total Count Total % Dept. % Total 52 52,0% 17,3% 34 34,0% 11,3% 17 17,0% 5,7% 133 44,3% 44,3% Med 18 18,0% 6,0% 50 50,0% 16,7% 35 35,0% 11,7% 103 34,3% 34,3% High 30 18,0% 10,0% 16 16,0% 5,3% 48 48,0% 16,0% 64 21,3% 21,3% 100 100,0% 33,3% 100 100,0% 33,3% 100 100,0% 33,3% 300 100,0% 100,0%

## Inferential Statistics: Sample Table

H0: All groups GPA means are equal H1: Not all are equal
Anova Sum of Squares Between Groups Within Groups Total Sd Mean Squares F P Value

9,295

4,648

12,621

,000

109,371

297

,368

118,667

299

## Data Analysis: Regression

Relationship between one dependent and one/more independent variables
OLS Method

## Regression: Sample Data

Monthly Patients (X) (X1000) 10 12 18 16 15 14 8 7 10 Monthly Profit (Y) (X1000 TL) 100 140 132 125 136 142 90 95 120

Y=b0+b1X1+...+bnXn
Y: Dependent variable Xi: Independent variables bi: Regression coefficients

## Y=69.52+4.13*X R2=0.6 r=0.77

Correlation Coefficient

Forecasting
Predicting future Time series analysis
Moving Averages Exponential Smoothing Seasonal Adjustments Trend Analysis

Qualitative Analysis
Delphi Method Judgemental Analysis

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## Forecasting: Trend Analysis

Like time based regression analysis
Independent variable: Time

## Tool for forecasting

Y=b0+b1Xt+...+bnXt-n+1
Y: Dependent var Xt: Independent var bi: Regression coefficients

## Trend Analysis: Example

Months(X) Monthly Patients (X) (X1000)

Decision Trees
Calculation of expected values in case of probabilistic/uncertain situations Making decision by induction backward

2005-10 (1) 10 2005-11 (2) 12 2005-12 (3) 18 2006-1 (4) 2006-2 (5) 2006-3 (6) 2006-4 (7) 2006-5 (8) 2006-7 (9) 16 15 14 8 7 10

## Decision Making Under Uncertainty

Best choices: optimistic approach
Risk taker

Risk avoider

## Minimax Regret Assigning probabilities Judgemental probability assignment

http://www.treeplan.com/images/treeplan_large_2009-11-06_13-22-46.gif

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## Queue Theory / Waiting Lines

Waiting line modeling Patients care, banking, cash points, call centers, maintenance staff and determinin ATMs Optimizing service cost

## Waiting Lines: Different Service Models

Single Channel/ Single Stage

Linear Programming
Objective Function (Maximization/Minimization)

Network Model

## Linear Programming: An Example

ABC Company produces chairs and tables. Maximum chairs for production period is limited by 6. For each chair two units of wooden material and for each chair three unit of wooden material is required. Total available wooden material is 19. Similarly, unit labor hours required by both chair and table is one and total available labor hours is limited by 8. Build LP model that maximizes total profit under given constraints.

## Linear Programming: Mathematical Model

Max z = 5x1 + 7x2 s.t. x1 < 6 2x1 + 3x2 < 19 x1 + x2 < 8 x1, x2 > 0

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## Linear Programming: Graphical Demonstration

Integer Programming
Linear programming where variables are integers
Possible variables: Patients, cars, engines, tourists, households...

## Integer Programming: Mathematical Representation

Max Z=6x+5y s.t: x+4y<=16 6x+4y<=30 2x-5y<=6 x,y >=0 and integers

## More time consuming and hard to solve

Branch-Bound Algorithms Cutting Planes Listing Enumerations

## Network Analysis: CPM&PERT

PERT: Project Evaluation and Review Technique CPM: Critical Path Method
Critical Path: Longest Path in a Network

## Tools for Project Scheduling and Monitoring Professional Software

Microsoft Project/Project Server Primavera

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## Network Analysis: CPM&PERT

Long term, complex and expensive projects Hundreds of activities Precedence relationships and parallel activities Certain and uncertain/probabilistic activity times Time/Cost trade offs Resource allocation and balancing

## Network Analysis: Transportation

Table Representation
Capacity

Network Representation

Demand

Capacity

Demand

## Source: 10 Minute Guide to Project Management

http://www.me.utexas.edu/~jensen/ORMM/models/unit/network/subunits/special_cases/transportation.html

## Network Analysis: Assignment

Personnel-Job assignments Worker-Machine assignments 1/0 Integer Programming

## Network Analysis: Assignment

Table Representation Network Representation

http://www.me.utexas.edu/~jensen/ORMM/models/unit/network/subunits/special_cases/assignment.html

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Dynamic Programming
Optimization by Best-of-Best
Stages States Decisions Optimal policy Transition functions

Non-Linear Programming
Objective Function and/or constraints are not linear
Quadratic Programming Polynomial Programming Trigonometric Models Expoential/Logarithmic Models Mixed Models

## Methods That Have Special Solutions

Differential based methods Methods Without Derivatives Local/Global Solutions

Divide&Conquer Method

## Non-Linear Programming: Sample Model

min f ( x) ( xi x) 2 ( yi y ) 2 s.t. ( xi x) 2 ( yi y ) 2 bi

## Multi Criteria Decision Making

More than one objective function
Minimum cost Maximum efficiency of machinery Minimum waste ...

## AHP: Analytical Hierarchy Proces

Objective/Goal Programming
Prioritization

## Sample AHP Model

Other Methods
Simulations Fuzzy Logic Artificial Neural Networks Evolutionary/Genetic Algorithms Simulated Annealing Ant Colony Optimization

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Simulation
Simulating decision making environment Monte Carlo Simlation Advanced Simlation Tools
Arena ProModel Siman GPSS ....

Fuzzy Logic

## Artificial Neural Networks

Simulation of Neural Netwoks
Prediction Pattern Recognation Classification ...

## ANN: General Structure

Evolutionary Algorithms
Biological Inspired Method Utilizing genetics for problem solving Operators
Cross Over Mutation New Generation ....

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## Ant Colony Optimization

Kaynak: http://www.ewh.ieee.org/soc/es/May2001/14/

Simulated Annealing

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