...Is Rental Insurance A Good Deal? QNT/561 April 23, 2012 Subhendu Roy In the dynamic society knowledge is always incomplete, yet a decision must be made. “Decision making is a process of first diverging to explore the possibilities and then converging on a solution(s)" (Cooper & Schindler, 2011). Many decisions are made under uncertainty; that is, with limited information about their potential consequences. The outcome can vary greatly. Most of time uncertainty exists whenever people determine a decision on a daily basis. A decision to buy rental car insurance will be answered by using the concept of probability. This paper will focus on the application of various probabilities to formulate the decision under uncertainty. Discreet outcome from statistical analysis as well as trade-offs between accuracy and precision obtained by different probabilities concepts shall be evaluated. According to car accident statistic stats, auto, fatal, and drunk driving, the estimation of having an accident is of one in 16 cars. It has provided useful information to make important decision. There are a number of probability concepts that can be used in determining the results from the research data that was given. Probability is used to limit the uncertainty of the decision on whether to buy the rental car insurance. The probability concept that works the best and meets all of the criteria from the information that was gathered is the Bayes’ Theorem. The application of Bayes' theorem helps...
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...Decision of Uncertainty Darylisha Jones QNT/561 February 14, 2011 Paul Thomasman Decision of Uncertainty Introduction Decision: Extending automobile warranties or not? It comes a time when one has to make that decision of extending an automobile warranty when it has expired. Because auto warranties provide well needed protection, it does not come cheap be any means. Therefore, the decision to be made is the price of purchasing a warranty over the cost of repairs without a warranty. An extended warranty supplies the ability of possessing coverage of an automobile. It supplies coverage for repairs, parts, rentals, and even labor at a warranty rate rather paying out- of -pocket for every issue. Research In order to make the correct decision, I will research information on purchasing extended warranty of a 2005 Chevrolet Impala. In one year my warranty of my vehicle will expire, and I will have to decide on purchasing an extended warranty to protect my vehicle. After researching the effects of not extending a warranty can result in high auto repair bills. An average cost of an engine repair without protection for an Impala is $2,000. Therefore, information of whether or not major repairs are needed for this vehicle must be taken into consideration. After gaining information from many auto repair shops of their experience of servicing vehicles, it is wise to acquire extending a warranty. The chances of auto repairs being needed within five years on my vehicle...
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...Decision: Should I purchase Car Insurance on a Rental Car For every trip I take, I normally rent a car and have always purchased the rental car insurance coverage rental cars offer. Hertz provides economical rental plan of $9.99 per day for four day week rate in comparison to other car rental services. Expenses for extension exceeding reservation of car follow the rate of $17.99 per day along with tax charges of $3.00 per day. Insurance rate of accidence of body/collision is $12.99/day extra. Insurance amount will be reduced by $500.00 for any cases of accident in the claim. The decision of uncertainly in the present case requires selection between personal and car rental service provided insurance through application of probability concept. Research “Car Accident Statistics, Stats, Auto, Fatal, and Drunk Driving” provides the figure for probabilistic estimation of accidents as the chances of one in 16 cars being the case of collision. Once I got the data for odds of accidents, I focused on accurately interpreting my data to make right decision. I have to find the prediction of advantages of choosing car rental insurance over covering the claim in personal policy in forthcoming section. Interpretation of Data Applying Bayes’ Theorem I chose to use Bayes' theorem as the probability model to interpret my data because it is most applicable to my 2100 mile rental insurance decision. The Bayes' theorem emulates the process of logical inference by determining the degree...
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...Decision of Uncertainty Paper QNT/561 Applied Business Research and Statistics November 23, 2011 Decision of Uncertainty Paper August of 2006 was memorable month for every citizen of El Paso area. That year record-breaking rainfall, which was twice the average annual destroyed more than 300 homes and caused 100 million dollars in damages. For days after the flood water subsided the area was still under threat of flooding because of the substandard drainage system and outdated levy system. This incident forced many El Pasoans to evaluate the possibility of the future flooding an estimate the cost of purchasing the flood insurance. According to the study performed by the National Weather Service Forecast Office Deep convection, which produces excessive rainfall and flash flooding, poses a threat to lives and property over south-central and southwestern New Mexico and far western Texas, primarily during the summer monsoon season. Forecasting these phenomena are difficult across this region due to the irregular terrain, the sparse data and the relatively poor performance of numerical models in the prediction of heavy rain across the southwestern United States (Rogash, 2003). Therefore, we can safely assume the2006 flooding in El Paso area was a combination of independent variables such as topography and existing drainage system and independent variables such as weather patterns and rainfall. Some such as city representative Eddie Holguin called it a 500-year abnormality...
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...A Decision of Uncertainty Latanya Franklin QNT561 September 17, 2012 Richard LA Valley A Decision of Uncertainty To reduce prices or increase Marketing budget in order to capture market share Sony Incorporated wants to make some changes within the business that in hopes will capture the market share of the industry. The only way to do this is by changing the pricing policy and strategy for the company. The first approach would be to create a development stage that will allow the managers to start setting prices this will allow the company to avoid releasing products or services that has no ability of sustaining profitable prices in the market. By changing the company pricing policies and strategies the company has a greater chance of receiving higher profits including an increase in the company market shares. With changes comes risks and uncertainty of making such changes. The company has to include other factors that include the reaction of the competitors. If the company makes the decision to change its price policies and strategies how will this change impact the company against their competitors by reducing prices. Questions of concern is will the competitors see this a threat and change their prices in response and if so what type of change will they make that will put the company at risk of capturing the market share. The decision that relies on the company here is rather to continue with the price policy and strategy which risks the chance of competitors taking action...
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...found to match the need, but multiple manufacturers usually make the device needed. Each manufacturer tries to show the unique and what they consider the best way to tackle the need. In the large capital equipment world, many times a trial is set up between the manufacturers and the end users are surveyed. This survey takes on different levels of importance depending on the decision-makers. The University of Phoenix Medical Center is in the process of building an addition that will have twelve new operating rooms replacing an existing eight room surgical suite. The existing surgical suite has eight surgical tables that will be replaced and the new surgery suite will have twelve new tables. Four manufacturers of surgery tables have been brought in for evaluation. They each had two weeks of trials and surveys were filled out by surgery employees. In order for the healthcare facility to make a good decision there is a “need to calculate the probability of something occurring or not occurring, make a judgment, consider alternatives and choose an action” (Duggan, n.d., para. 1). The event of the uncertainty is which manufacturer’s tables to choose to buy. If all things are equal the probability of picking the best table is one in four or 25%. This 25% probability can be changed through the trial of the beds in use, the survey of the hospital, previous research and history of each manufacturer, and the history of table use within the facility. Using the survey a confidence interval...
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...A Decision of Uncertainty A Decision of Uncertainty Paper There are decisions that people make where the outcome is presumably known and, there are the decisions that people make where the results are unknown. The latter part of the aforementioned statement is also known as decisions of uncertainty. To make these choices with more confidence, we will explore concepts that will formulate these judgments. We also have to include appropriate probability concepts that will help limit uncertainty in certain decisions. This paper will disclose the decision to reside in the tri-state area with the probability of destructive hurricanes occurring. Next this paper will reveal concepts and the outcome from the statistical analysis that was used to determine the final decision and, the tradeoffs between accuracy and precision required by various probability concepts. As a final point, this paper will demonstrate the effects the decision had on the data provided and the decision that was ultimately made. Probability Concepts and Application Hurricane Sandy hit Atlantic City, New Jersey on October 29, 2012. A 900-mile wide storm, Sandy affected the entire northeastern United States with devastating winds, rain and floods. New Jersey and New York suffered the worst from the super storm leaving thousands of people without power for days. People living in this area were not prepared or expected the storm to devastate the area as it did leaving homes and personal...
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...Decision of Uncertainty Paper As a health care establishment, it is easy to become caught up in the day- to- day tasks at hand without addressing the needs or concerns of the patients. With the change in the economy and the reasons for the emergency room being utilized, it is important to take a moment to see how the flow of the delivery of services can be confined to smooth transitions. This paper will include appropriate probability concepts, rationale, statistical analysis, and a decision tailored to research studies specific to the thesis statement, question response types, and classification of our findings. Thesis Question "Does the emergency room get utilized more by a particular race and is there a reason for this occurrence?" Appropriate Probability Concepts and Your Application of Them to Find Resulting Data To Limit the Uncertainty of this Decision Probability theory is an important part of statistical theory that bridges descriptive and inferential statistics. It is the science of uncertainty, chance or likelihood (Cooper & Schindler, 2008). There are three kinds of probability; classical, empirical and subjective. In this instance, we will focus on a mixture of empirical probability which is based on past experiences and subjective probability which a probability is assigned to an event based upon whatever evidence is available. A closer look will be taken at the records of the patients treated by the emergency care team...
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...Arguelles, Amanda Marie Co, Darlene Angelini R. Assignment 2 I. Given: U W e W Where α is a parameter (1a) To prove that more is preferred than less, we need to show that this individual’s preferences are nonsatiated. This can be shown by satisfying the condition, would show that for every one unit increase in wealth, satisfaction will increase as well. For this utility function, we will get: U (W ) 0 . This W U (e W ) 0 (e W )( ) 0 e W 0 W Because W > 0, we can then conclude that more is preferred to less consumption given the utility function. (1b) To prove that the consumer is risk averse we must show that this utility function has diminishing marginal utility wherein the condition that the marginal utility from an extra increase of utility decreases as your payoff increases. Hence, this would represent risk-aversion since the bigger the amount of money that is at stake, the higher satisfaction from winning is offset by an even higher dissatisfaction from losing. For this utility function we get: U 2 (e W ) 0 must be satisfied. This means 2W U 2 (e W ) U 2 (e W ) ( e W )( ) 2e W 0 0 2 2 W W Since the second order derivative of the function gives a negative value, we could say that the consumer is risk averse. (2a) There are two measures of risk aversion that was developed by Pratt and Arrow. The first measurement would be the absolute risk aversion coefficient/index. This measurement...
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...Effects of Economic Uncertainty on Business Decision Making Market uncertainty has never been higher. Business observers, CEO’s and policymakers have repeatedly raised concerns about the uncertainty of doing business during the ongoing financial and economic crisis of 2007. No one is sure whether or not people who do business with Uncle Sam will be left out in the cold. This kind of uncertainty can play havoc with business and with the economy at large. The Patient Protection and Affordable Care Act (PPACA), widely recognized as Obamacare, was signed into law by President Barack Obama in March 2010. It is intended to decrease the number of uninsured Americans and lower the overall cost of health care in the U.S. Most business owners are concerned about the program’s potentially harmful effects on the cost of employee health care coverage. Charlie McCrudden, vice president of government relations for the Air Conditioning Contractors of America, said “There’s a lot of uncertainty about what contractors will do about providing health care for their employees…” (Anesi). As uncertainty continues to grow in the markets, so do the changes in employment practices. During challenging economic times, many businesses are opting to hire temporary and contract workers as opposed to full time employees. Not only does this hiring practice affect employment rates and the economy as a whole, but is also affects those seeking work and financial stability. Uncertainty and ambiguity are...
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...Application of Decision Trees by Companies and its Advantages and Disadvantages Management science uses different ways of approach to solve management problems. Management science which is also referred to as decision analysis is part of a core of business. Decision analysis is a method used in the business firm to help managers resolve uncertainties in making investment decisions. It helps them make choices, take risks, and gain information that is needed. The decision tree can be simple or complex. It shows a combination of choice with different possible events. The usage of decision trees has helped various companies to determine the best alternative, which yields the greatest monetary gain. An example of a decision tree applied in real life is by the Oglethorpe Power Corporation (OPC). It was used in deciding whether to invest in a major transmission system. Firstly, three groups were established. The first group consists of a senior management team which helps review ideas, recommendations and make a decision based on the approach. Then, we have the analytical team which is responsible for conducting the analysis and analyse the ideas and recommendations given. The last group consists of the OPC experts who helps solve specific topics which have been brought up during the analysing process. The first step in decision analysis was identifying the problems that may arise accurately which were conducted by the analytic team. Major decisions, uncertainties, flaws and any...
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...From there the paper moves into defining the rational approach as it relates to decision-making. Next, the paper makes mention of Benjamin Franklin utilizing “pros” and “cons” in his decision making process”. Following this, there is a quick mention on uncertainty as it relates to financial risk as well as a brief mention of a step-based rational decision-making approach. After the definition section there is an application section which deals largely with uncertainty as well as intuition of a decision maker. It is argued that the rational approach fails to address certain aspects of uncertainty but does allow for improved decision making as a whole. Finally, the paper concludes concisely noting that the rational approach is not fully achievable in the context of the real world as it is intended for an ideal state bounded by rational criterion. Rational Approach The rational approach to individual decision-making allows for managers to operate in the context of an ideal systematic method. Decision-making, particularly in the context of an organization, can be difficult with significant complexity and multi-faceted dimensions. Operating outside of a specific framework can increase the difficulty for managers to make the best possible rational solution resulting in arbitrary and sometimes non-optimal decisions. The rational approach allows for greater optimization and normalization in decision-making by managers across firms. Rational Approach Defined In order to move forward...
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...supply chain given that different stages have different owners • All flows of information, product or funds generates costs within the supply chain • Supply chain management involves the management of flows between and among stages in a supply chain to maximise total supply chain profitability Decision Phases Three categories - Depending on the frequency of each decision and the time frame over which a decision has an impact, Supply chain strategy or design Supply chain planning Supply chain operation Supply chain strategy • Decides how to structure the supply chain over the next several years - chain configuration, - resource allocated and - process at each stage should perform • Decisions include - location and capacities of production and warehousing facilities, - the products to be manufactured or stored at various locations, - the method of transportation to be made available along different shipping legs, and - the type of information system to be utilised Supply chain planning • Under the given configuration decisions are made which has impact on a time frame of quarter to a year • Starts with a forecast the coming year or a comparable time frame • Planning decisions include –...
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...Decisions Based on Analysis of Alternatives (AoA) Dr. David G. Ullman 1 , January 2009 Analysis of Alternatives (AoA) is a term that has been adopted by the Office of Management and Budget (OMB) and the Department of Defense (DoD) to ensure that multiple alternatives have been analyzed prior to making costly investment decisions. AoA is an effort to move from the justification for a single alternative to the exploration of multiple alternatives so agencies have a basis for funding the best possible projects in a rational, defensible manner considering risk and uncertainty. As with other decisionmaking tools, techniques, and methodologies, AoA is most effectively used in a higherlevel decision-making context, such as an Enterprise Architecture (EA) framework. In fact, it is doubtful that the higher levels of AoA maturity (see below) could even be considered outside of a higher-level context. What Is AoA? And Why Do It? Analysis of Alternatives is the analytical comparison of multiple alternatives to be completed before committing resources to one project. The practice of comparing multiple alternative solutions has long been a part of engineering practice (Ullman, 2009, especially Chapter 7, Concept Generation). There is, however, a natural human tendency to propose a single alternative for funding or development and justify this option rather than compare multiple options with the goal of choosing the best one. Justification is easier to do than evaluating multiple options and...
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...business decision making. Formerly it was known as “Business Economics” but the term has now been discarded in favour of Managerial Economics. Managerial Economics may be defined as the study of economic theories, logic and methodology which are generally applied to seek solution to the practical problems of business. Managerial Economics is thus constituted of that part of economic knowledge or economic theories which is used as a tool of analysing business problems for rational business decisions. Managerial Economics is often called as Business Economics or Economic for Firms. Definition of Managerial Economics: “Managerial Economics is economics applied in decision making. It is a special branch of economics bridging the gap between abstract theory and managerial practice.” – Haynes, Mote and Paul. “Business Economics consists of the use of economic modes of thought to analyse business situations.” - McNair and Meriam “Business Economics (Managerial Economics) is the integration of economic theory with business practice for the purpose of facilitating decision making and forward planning by management.” - Spencerand Seegelman. “Managerial economics is concerned with application of economic concepts and economic analysis to the problems of formulating rational managerial decision.” – Mansfield Nature of Managerial Economics: • The primary function of management executive in a business organisation is decision making and forward planning. • Decision making...
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