Decision Analysis Problems

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HW2_answer_sheet.xlsx
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Q1

States of Nature Summary Decision
Decision Gasoline Availablity a) maximax Motel
Investment Shortage Stable Supply Surplus Maximum Minimum b) maximin Theater
Motel -$7,500 $12,000 $23,000 $23,000 -$7,500 c) minimax regret Motel or Restaurant
Restaurant $3,000 $7,000 $6,500 $7,000 $3,000 d) Hurwicz (alpha = 0.4) Theater
Theater $5,000 $6,000 $4,000 $6,000 $4,000 e) Equal Likelihood Motel
Maximax decision =
Maximin decision =
Regret Table
States of Nature
Decision Gasoline Availablity
Investment Shortage Stable Supply Surplus Maximum
Motel $12,500 $0 $0 $12,500
Restaurant $2,000 $5,000 $16,500 $16,500
Theater $0 $6,000 $19,000 $19,000
Minimax regret =
Hurwicz
alpha = 0.3 Decision:
1 - alpha = 0.7
Motel $1,650
Restaurant $4,200
Theater $4,600
Equal Likelihood
Motel $9,167 Decision:
Restaurant $5,500
Theater $5,000

Q2

Decision Tables
Data
Profit Rain Overcast Sunshine EV
Probability 0.35 0.25 0.4 Sun Visor
Sun Visors -400 -200 1500 Umbrella
Umbrellas 2100 0 -800
Opportunity Loss Table
Rain Overcast Sunshine EOL
Probability 0.35 0.25 0.4 Sun Visor
Sun Visors 2500 200 0 Umbrella
Umbrellas 0 0 2300
Decision:
Minimize your Expected Opportunity Loss

Q3

Real estate Development
Decision Tables
Interest Rate
Project Decline (0.45) Stable (0.35) Increase (0.2) EV
Office park $0.40 $1.55 $3.50 Office park Decision
Office building 2.5 1.8 2.75 Office building
Warehouse 1.7 1.45 1.5 Warehouse
Mall 0.8 2.3 3.7 Mall
Condominiums 3.2 1.5 0.5 Condominiums
Opportunity Loss table
Interest Rate
Project Decline (0.45) Stable (0.35) Increase (0.2)
Office park
Office building
Warehouse
Mall
Condominiums
EVPI

Q4

Economic Conditions
Degree Program Recession Average Good Robust Maximum Minimum Summary Decision
Graphic design 150,000 175,000 220,000 200,000 220,000 150,000 a) maximax Real estate
Nursing 160,000 180,000 205,000 215,000 215,000 160,000 b) maximin Nursing
Real estate 125,000 165,000 220,000 210,000 220,000 125,000 c) equal likelihood Real estate
Medical technology 135,000 180,000 210,000 270,000 270,000 135,000 d) Hurwicz (alpha = 0.5) Real estate
Culinary technology 110,000 145,000 235,000 205,000 235,000 110,000
Computer information technology 130,000 150,000 190,000 245,000 245,000 130,000
Maximax decision =
Maximin decision =
Regret Table
Economic Conditions
Degree Program Recession Average Good Robust MAX MIN
Graphic design 10,000 5,000 15,000 70,000
Nursing 0 0 30,000 55,000
Real estate 35,000 15,000 15,000 60,000
Medical technology 25,000 0 25,000 0
Culinary technology 50,000 35,000 0 65,000
Computer information technology 30,000 30,000 45,000 25,000
Decision: Maximax 0
Equal Likelihood Decision: Maximin 0
Graphic design $186,250
Nursing $190,000
Real estate $180,000
Medical technology $198,750
Culinary technology $173,750
Computer information technology $178,750 Decision:
Hurwicz
alpha = 0.4
1 - alpha = 0.6
Graphic design $178,000
Nursing $182,000
Real estate $163,000
Medical technology $189,000
Culinary technology $160,000
Computer information technology $176,000 Decision:

Q5

0.7
Shortage
250000 Problem #25 (reference)
Compact Cars 250000 Data Results
Profit Shortage Surplus EMV
0.3 Probability 0.7 0.3
Surplus Compact cars 250000 150000
150000 Full-sized cars -90000 650000
150000 Trucks 125000 180000
0.7
Shortage
-90000
Full-sized cars -90000
1
0 0.3
Surplus Decision
650000
650000
0.7
Shortage
125000
Trucks 125000
0.3
Surplus
180000
170000 180000
ID Name Value Prob Pred Kind NS S1 S2 S3 S4 S5 Row Col Mark
0 TreePlan 0 0 0 D 3 1 2 3 0 0 14 1 TRUE
1 0 0 E 2 4 5 0 0 0 4 5 TRUE
2 0 0 E 2 6 7 0 0 0 14 5 TRUE
3 0 0 E 2 8 9 0 0 0 24 5 TRUE
4 1 T 0 0 0 0 0 0 2 9 TRUE
5 1 T 0 0 0 0 0 0 7 9 TRUE
6 2 T 0 0 0 0 0 0 12 9 TRUE
7 2 T 0 0 0 0 0 0 17 9 TRUE
8 3 T 0 0 0 0 0 0 22 9 TRUE
9 3 T 0 0 0 0 0 0 27 9 TRUE