Analytics - Chapter 14 Decision Analysis I

Which decision rule optimistically assumes that nature will always be on our side regardless of the decision?

Maximax

Which decision rule is associated with the smallest maximum opportunity loss?

Minimax

How many states of nature are associated with a decision problem with five alternatives and 20 payoffs?

4

What are the two basic structural components of a payoff matrix?

States of nature and alternatives

What is the expected value if X1 = 2000, X2 = 1000, P1 = 0.3, P2 =0.7?

1300

What is the probability of exceeding one standard deviation from the mean in a normal distribution?

0.16

How many payoffs are associated with a decision problem with four alternatives and three states of nature?

12

Which one best describes EMV?

Average monetary outcome of a decision if it was repeated a large number of times.

What are the primary problems in the decision-making process?

Conflicting objectives, Lack of data, Uncertainty regarding the future

What are the steps in the decision analysis process?

Compute outcomes, Define problem context, Identify Alternatives

Which one is NOT an objective of decision analysis?

Ensure good outcomes

Which one is NOT a step in the decision analysis process?

Implement solutions

What are the objectives of decision analysis?

Incorporate problem uncertainty, Analyze decision problems logically, Improve the decision analysis process

Which one is associated with the decision with the smallest EOL?

Largest EMV

Which one is NOT a decision rule for applications involving uncertainty?

None of the others. Maximin, Maximax, Minimax regret do.

Which one represents factors that are important to the decision maker?

Payoffs, Affirmatives, States of nature

What is the first step in the decision-making process?

Problem recognition and definition

Which of the following is a benefit of Analytics in the decision-making process?

Providing a structural context, Quantifying outcomes, Incorporating uncertainty

Which of the following are types of decision-making environments?

Under uncertainty, Under risk, Under certainty

Which of the following is NOT a primary problem in the decision-making process?

Using Analytics to support the process