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Name: Chandra Sekhar Reddy (1910097)

Week Six Reflection on Decision-Making Tools

Decision-making is an everyday part of our life because to perform any task or to plane any work, we use decision making to sort our time and to achieve better results without any clashes between our works. In operations management, decision-making tools are essential because it helps to maintain and run various operation successfully. Decision- making tools help to take actions strategically so that any operation manager can plan and execute their operation in a way that leads to most profitability. As we make decisions from our day to day life on what to eat or what to do as well as in operation management, we construct a decision tree in which we start with the best alternative from which we can get different possible alternatives. From each alternative, we will get a different state of nature, which will lead to various probabilities from which we can choose a better decision plan. For example, in daily life, we pick a better alternative to complete a task such as if we are late for work, we might take a car instead of a bus so that this alternative will save some time. Decision-making environments are the different environments in which we make decisions such as decision making under uncertainty, decision-making under risk, and decision-making under certainty.

Decision making under uncertainty is an environment in which we have complete uncertainty of which state of nature occurs. In uncertainty, there are different types of environments such as Maximax, maximin, and equally likely. In maximax uncertainty, we have to pick the maximum possible gain as possible so that we can avoid the uncertainty. In maximin, we have to pick the least possible losses that we can loose as least as possible rather than losing the maximum loss. In the final equally likely uncertainty, we have to choose the highest alternative to achieve a maximum average outcome. To explain uncertainty with a real-life example, while our teammates were discussing the online and in-person classes advantages and disadvantages we understand that both of the classes have their benefits, so all our team was in an uncertain environment, so we decided to choose a specific type of classes with the help of maximax uncertainty. Decision-making under risk is another environment where we have a state of nature with maximum risk probability. In this risk decision-making, we calculate the Expected Monetary Value(EMV) of each alternative to chose a better alternative to avoid maximum loss. Certainty is another decision-making environment in which we gather the information that leads to the exact result of the chosen alternative. To achieve this information, we calculate the Expected Value of Perfect Information(EVPI). EVPI is calculated with expected value with perfect information minus maximum EMV. Decision trees are a graphical representation of decision processes in which we indicate various alternatives, state of nature, and respective probabilities along with the respective payoffs of the decisions taken. Decision trees are vital because they help to organize the probabilities that we have and to make a better final decision, which has a higher chance of success. Decision tree in ethical decision-making helps operation managers to make decisions that are ethical and will result in maximizing the shareholder's value by keeping a good relationship with them. By making decisions ethical, we can improve the standards of the company in public and also the operations sectors.