...WEEK 10, Discussion Question 1: “Transshipment Problems” Can we apply transshipment models to inventory applications? Why or why not? Is the transportation model an example of decision making under certainty or decision making under uncertainty? Why? Can we apply transshipment models to inventory applications? Why or why not? Yes, transshipment models can be applied to inventory applications. This will ensure lower costs through proper management and disbursement of the inventory while providing faster response times. The inventory levels can be managed by location in order to ensure minimal levels and the shipping will occur for less cost and faster service due to inventory placement within regions (Taylor III, 2011). Is the transportation model an example of decision making under certainty or decision making under uncertainty? Why? The transportation model is an example of decision making under certainty. The data, in this case the route and items, has to be known in order for the decision making to be determined under certainty (Taylor III, 2011). Explain the assignment model and how it facilitates in solving transportation problems. What benefits would be gained from using this model? 2ND RESPONSE Can we apply transshipment models to inventory applications? Why or why not? Yes, it does seem that transshipment models can be applied to inventory applications. Inventory applications deal with transporting goods to different destinations just like the transshipment...
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...The three decision-making environments presented in the book are decision making under certainty, decision making under uncertainty, and decision making under risk. Decision-making under certainty – Decision makers knows the outcomes of every alternative or choice. They will make a decision based on what will benefit them the best. I’m a firm believer of eating healthy foods all the time. The healthier you eat the better your reproductive system will respond and the better you will feel. I typically find myself paying close attention to how I shop and what I purchase from the grocery store. I tend to eat fresh produce and most things are made from scratch. However this can be very expensive on a monthly basis. It would be much easier and less expensive to buy frozen foods and microwave all my food but overall this would not be beneficial to me. Decision-making under uncertainty – Decision makers does not know the probabilities of various outcomes, as there are several outcomes for each alternative. After finishing High School, I was faced with a variety of decisions to make without possibly knowing the uncertainty of what would happen in the future. Option A was to go straight into college, not knowing if I would finish in my first 4 years. My next option was to immediately go into the workforce and take my chances in the world hoping to land a career and my last option was to join the military not knowing if I would end up fighting the war...
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...goods to different destinations. Items are transported from one destination to another just like inventory applications. Is the transportation model an example of decision making under certainty or decision making under uncertainty? Why? Transportation model is an example of decision making under certainty because the destinations of the goods are decided and are not unknown which makes the decision making a certainty because the destination is known. The transshipment model is an extension of the transportation model in which intermediate transshipment points are added between the sources and destinations. An example of a transshipment point is a distribution center or warehouse located between plants and stores. In a transshipment problem, items may be transported from sources through trans-shipment points on to destinations, from one source to another, from one transshipment point to another, from one destination to another, or directly from sources to destinations, or some combination of these alternatives. Therefore we can apply the transshipment models to inventory applications because deals with a source and destinations and they are similar. The transportation model is an example of decision making under certainty because the sources and destination are known factors before making the decision. Author: Anonymous Date: Thursday, April 28, 2011 4:35:45 PM EDT Subject: Week 10 Discussion 2 Explain the assignment model and how it facilitates in solving transportation...
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...Significance and Limitations of Rational Decision-making Managers as Decision-makers The Rational Model Non-rational Models Decision-making Process Types of Managerial Decisions Programmed Decisions Non-programmed Decisions Decision-making Under Certainty, Uncertainty and Risk Management Information System vs Decision Support System The Systems Approach to Decision-making Group Decision-making Forms of Group Decision-making Decision-making Techniques Summary Decision-making describes the process by which a course of action is selected to deal with a specific problem. The success of an organization depends greatly on the decisions of managers. There are two major types of models used by managers to make decisions - (1) rational model and (2) non-rational models. In the rational model, managers engage in rational decision-making processes. At the time of decision-making, they possess as well as understand all the information that is relevant to their decision. In contrast, non-rational models of managerial decision-making suggest that limitations of information-gathering and information-processing make it difficult for managers to make optimal decisions. The three non-rational models of decision-making discussed in the chapter are: satisficing, incremental, and garbage-can models. Any decision-making process contains seven basic steps: (1) identifying the problem; (2) identifying resources and constraints, (3) generating alternative...
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...Management Decision Making Under Certainty, Uncertainty, Environment is effect on the decisions which are making undercertainty.Certainty and undercertainty are reciprocal to each other,the degree will be vary certainty to uncertainty Decisions making associate with different kinds of risks. Certainty situation refer to who people think they are making reasonable decisions and what will be next in future and they predict analysis and make decisions . The reliable information will help to considered the cause and effect the matter is come to know about relationship for both uncertainty and certainty. Uncertainty situation reffer to people have data base which is not sufficient and reliable data which base brings sure accurate result so this becomes a not sure able result which tells neither good nor bad results. Evaluation of different variables for interaction is so difficult,For example if i start to expand the business in Chinese market but I have nominal and not sufficient information About china culture,climate,political situation ,Govt laws,policies,norms,values etc. It will be more difficult in situation to start business. Founder of Pakistan Quid-E_Azam says”I don’t like to take Right Decisions….!!!!! “I take decisions and make them Right. Correct Pay off table Alternative Low(125dozen) Medium(800dozen) High (1750 dozen) Small facility 15625 15625 15625 Medium facility 100000 640000 1420000 Large facility 218750 1400000 3062500 Decision making under...
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...introduction of this summary. The cost of capital to the owners of a firm is simply the rate of interest in bonds; this has derived the proposition that the firm, acting rationally, will tend to push investment to the point where the marginal yield on physical assets is equal to the market rate of interest. This proposition follows from either of two criteria of rational decision-making: (1) the maximization of profits, and (2) the maximization of market value. Under either formulation, the cost of capital is equal to the rate of interest on bonds. These have equivalent implications under certainty (Certainty Equivalent Approach) but not under uncertainty. The attempt of allowing uncertainty takes the form of superimposing on the results of the certainty analysis the notion of a risk discount to be subtracted from the expected yield. No satisfactory explanation has yet been provided as to what determines the size of the risk discount and how it varies in response to changes in other variables. The profit maximization criterion, under the world of uncertainty, is no longer well defined; there corresponds to each decision of the firm not a unique profit outcome, but a plurality of mutually exclusive outcomes which can at best be described by a subjective probability function. Profit outcome has become a random variable and its maximization has no longer an operational meaning. Why? Because to compare profit outcomes of...
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...Introduction What is involved in making a good decision? A good decision is one that is based on logic, considers all available data and possible alternatives, and the quantitative approach. Decision theory is an analytic and systematic approach to the study of decision making The Six Steps in Decision Making 1. Clearly define the problem at hand 2. List the possible alternatives 3. Identify the possible outcomes or states of nature 4. List the payoff or profit of each combination of alternatives and outcomes 5. Select one of the mathematical decision theory models 6. Apply the model and make your decision 1 Thompson Lumber Company Step 1 – Define the problem Expand by manufacturing and marketing a new product, backyard storage sheds Step 2 – List alternatives Construct a large new plant A small plant No plant at all Step 3 – Identify possible outcomes The market could be favorable or unfavorable Possible outcomes are also called “States of Nature” Thompson Lumber Company Step 4 – List the payoffs Identify conditional values for the conditional large, small, and no plants for the two possible market conditions Payoffs or profits are called conditional values 2 Thompson Lumber Company Step 4 – List the payoffs conditional Identify conditional values for the large, small, and no plants for the two possible market conditions STATE OF NATURE FAVORABLE MARKET ($) UNFAVORABLE MARKET ($) ...
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...distinguish between good and bad decisions. A “good” decision is one that is based on logic and all available information. A “bad” decision is one that is not based on logic and all available information. It is possible for an unfortunate or undesired outcome to result from a “good” decision (witness a patient expiring after open-heart surgery). It is also possible to have a favorable or desirable outcome result from a “bad” decision (you win at Blackjack, even though you drew a card when you already held an “18”). 2. An alternative is a course of action over which we have control. A state of nature is an event or occurrence over which we have no control. An example of a choice between alternatives is our decision as to whether or not to carry an umbrella to work today. The relevant state of nature is whether or not it will rain. 3. A decision table for Jenine Duffey might look like the following: Recession Inflation Recession and Inflation Invest in Process #1 Invest in Process #2 Invest in Process #3 4. EMV is defined as the expected monetary value. The EMV is the expected or average return that we would realize if we were to repeat the decision an infinite number of times. “Expected value under certainty” is the expected or average return that we would realize if we were to repeat the decision an infinite number of times, each time having “perfect” or complete information and making the “best” possible decision based on that information. EVPI...
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...3 Decision Analysis 1) Expected monetary value (EMV) is the average or expected monetary outcome of a decision if it can be repeated a large number of times. Answer: TRUE Diff: 2 Topic: DECISION MAKING UNDER RISK 2) Expected monetary value (EMV) is the payoff you should expect to occur when you choose a particular alternative. Answer: FALSE Diff: 2 Topic: DECISION MAKING UNDER RISK 3) The decision maker can control states of nature. Answer: FALSE Diff: 1 Topic: THE SIX STEPS IN DECISION MAKING 4) All decisions that result in a favorable outcome are considered to be good decisions. Answer: FALSE Diff: 2 Topic: INTRODUCTION 5) The difference in decision making under risk and decision making under uncertainty is that under risk, we think we know the probabilities of the states of nature, while under uncertainty we do not know the probabilities of the states of nature. Answer: TRUE Diff: 2 Topic: TYPES OF DECISION-MAKING ENVIRONMENTS 6) EVPI (expected value of perfect information) is a measure of the maximum EMV as a result of additional information. Answer: TRUE Diff: 2 Topic: DECISION MAKING UNDER RISK 7) When using the EOL as a decision criterion, the best decision is the alternative with the largest EOL value. Answer: FALSE Diff: 2 Topic: DECISION MAKING UNDER RISK 8) To determine the effect of input changes on decision results, we should perform a sensitivity analysis. Answer: TRUE Diff: 2 Topic: DECISION MAKING...
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...The cost of capital, corporation finance and the theory of investment Modigliani & Miller – 1958 Introduction In a world of certainty investment decision should be in line with either profit maximization or market value maximization. - According to profit maximization, a physical asset is worth acquiring if it increases the net profit of the owners of the firm. But net profit increases only if the expected rate of return on the asset exceeds the rate of interest - According to market value maximization an asset is worth acquiring if it increases the value of the owners equity i.e. if it adds more to the market value of the firm then the costs of its acquisition. At a micro – economic level a world of certainty has little descriptive value. A risk factor should be taken into account when pricing capital. Profit maximization and market value maximization seemed to have equivalent implications in a world of certainty, however in a world of uncertainty this equivalence vanishes. - Under uncertainty the profit outcome has become a random variable and as such its maximization no longer has operational meaning. - Market value maximization provides a workable theory of investment in a world of uncertainty. Under this approach any investment project and its financing plan must only pass the following test: Will the project, as financed, raise the market value of the firm’s shares? If so, is it worth undertaking; if not, its return is less ten the marginal...
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...EXAMPLE 1 International litigation is often difficult to seize because of different procedures used by States and principles laying down procedures. These principles are related to the judicial conceptions that States have adopted. This point will be adressed latter in this introduction. On the other hand, International Convention, in a general or a specific view in relation to civil and commercial matter are enacted by States in order to uniform and harmonize body of rules applicable to international commercial litigation. For example, Lugano convention harmonized rules in order to determine competence of jurisdiction, or the Convention of Vienna on international sales of goods determines competence of jurisdiction and the law applicable. In order to explain which criterion is more important in the construction of private international law concerned with international commercial litigation, it will be relevant to focus this study on the rules of competence of jurisdiction. Besides the general system of conventions, as explained above, judicial traditions of countries can explain debates around the best ways to enact rules on international trade, and especially international litigations arise from commercial relationships between actors. Indeed, on one hand, common law countries focus on the role of the judge for the creation, the interpretation and the application of law rules. Some authors argue that the predominance of the judge in common law judicial system...
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...Lesson 04 Decision Making Solutions Solved Problem #1: see text book Solved Problem #2: see textbook Solved Problem #3: see textbook Solved Problem #6: (costs) see textbook #1: A small building contractor has recently experienced two successive years in which work opportunities exceeded the firm’s capacity. The contractor must now make a decision on capacity for the next year. Estimated profits under each of the two possible states of nature are shown in the table below. The units are in $ thousands. Next Year’s Demand Low High 50 60 20 80 40 70 -AlternativesDo nothing Expand Subcontract a. Calculate the regret table. -AlternativesDo nothing Expand Subcontract Low High 0 30 10 20 0 10 Determine the alternative and payoff /regret which should be selected for the decision criteria in each of the following questions. b. Maximax (best of all possible alternatives)? Expand – payoff $80 thousand c. Maximin (best of all the worst alternatives)? Do nothing – payoff $50 thousand d. Laplace (best of the expected payoffs for all alternatives)? Tie between Do nothing and Subcontract – Payoff $55 thousand e. Minimax regret (least of all the maximum regrets for each alternative)? Subcontract – Regret $10 thousand #2: Refer to problem 1. Suppose after a certain amount of discussion, the contractor is able to subjectively assess the probabilities of low and high demand: P(Low) = .3, P(High) = .7. a. Determine the expected profit fore each alternative? Do nothing - $57 thousand...
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...planning requires the participation of a wide range of organizational members. • The organization benefits by having access to a broad base of experience and knowledge in the planning process. • Organizational members are more likely to “buy in” to a plan that they have helped develop. (6 marks) PART D QUESTION 1 Decision making is the process through which managers and leaders identify and resolve problems and capitalize on opportunities. a) What are the conditions in decision making? Conditions under Decision Making: a) Certainty – situation in which a decision maker can make accurate decisions because the outcome of every alternative is known. b) Risk – condition in which a decision maker is able to estimate the likelihood of certain outcomes. c) Uncertainty – a situation in which a decision maker has neither certainty nor reasonable probability estimates available. (3 marks) b) Describe the seven (7) steps in the decision-making process. 1. Identifying Opportunities and Problems: The decision maker begins by recognizing opportunities or problem that requires a...
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...M2 CAPITAL BUDGETING RISK prof a s khalsa, iper pgdm 1 Nature of Risk Ç Risk exists because of the inability of the decision-maker to make perfect forecasts. Ç In formal terms, the risk associated with an investment may be defined as the variability that is likely to occur in the future returns from the investment. Ç Three broad categories of the events influencing the investment forecasts: 4 General economic conditions 4 Industry factors 4 Company factors 2 prof a s khalsa, iper pgdm Techniques for Risk Analysis Ç Statistical Techniques for Risk Analysis 4 Probability 4 Variance or Standard Deviation 4 Coefficient of Variation Ç Conventional Techniques of Risk Analysis 4 Payback 4 Risk-adjusted discount rate 4 Certainty equivalent 3 prof a s khalsa, iper pgdm Probability Ç A typical forecast is single figure for a period. This is referred to as “best estimate” or “most likely” forecast: 4 Firstly, we do not know the chances of this figure actually occurring, i.e., the uncertainty surrounding this figure. 4 Secondly, the meaning of best estimates or most likely is not very clear. It is not known whether it is mean, median or mode. Ç For these reasons, a forecaster should not give just one estimate, but a range of associated probability–a probability distribution. 4 prof a s khalsa, iper pgdm ...
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...ubyuhb hu b Under this form of ethics you can't justify an action by showing that it produced good consequences, which is why it's sometimes called 'non-Consequentialist'. The word 'deontological' comes from the Greek word deon, which means 'duty'. Duty-based ethics are usually what people are talking about when they refer to 'the principle of the thing'. Duty-based ethics teaches that some acts are right or wrong because of the sorts of things they are, and people have a duty to act accordingly, regardless of the good or bad consequences that may be produced. Some kinds of action are wrong or right in themselves, regardless of the consequences. Deontologists live in a universe of moral rules, such as: It is wrong to kill innocent people It is wrong to steal It is wrong to tell lies It is right to keep promises Someone who follows Duty-based ethics should do the right thing, even if that produces more harm (or less good) than doing the wrong thing: People have a duty to do the right thing, even if it produces a bad result. So, for example, the philosopher Kant thought that it would be wrong to tell a lie in order to save a friend from a murderer. If we compare Deontologists with Consequentialists we can see that Consequentialists begin by considering what things are good, and identify 'right' actions as the ones that produce the maximum of those good things. Deontologists appear to do it the other way around; they first consider what actions are...
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