Midterm Exam - DSC-8240

1. Midterm Exam - DSC-8240 Murugan Chellasamy

2. Cases • Cold Fusion • Prescribed Fire • GPC • Strenlar

3. Cold Fusion • Objective Hierarchies • Variables & Measures • Problem Structuring • Consequence Table • Influence Diagram • Decision Tree • Mathematical Model - NA • Solutions & Sensitivity Cases

4. Cold Fusion - Objective Hierarchies

5. Cold Fusion - Variables & Measures • Decision Variables: • Good for the Society • Bad for the Society • Chance Variables • Bill Passed • Bill Rejected • High Political Value • Low Political Value • Fusion Works • Fusion Fails • Economically Feasible • Economically Infeasible • Consequence • Actually Helps Society • Does not make any difference

6. Cold Fusion - Consequence Table

7. Cold Fusion - Influence Diagram High Political Value High/Low Fusion Works/Fails Bill Passed/Rejected Good /Bad For Society High Satisfaction

8. Cold Fusion - Decision Tree

9. Cold Fusion - Solutions & Sensitivity I believe the fate of this bill will be determined by the relative publicity it can generate to help the politicians and the scientists. It would be very hard to determine the economic and social benefits derived from Cold Fusion. It could be very beneficial to the society but if it meant that we would have to stop using the existing sources of energy, it may cause severe economic strains. On the other hand it may help the economy but may create problems to the society by making destructive technology available at a cheaper cost. Even if the bill gets passed, it may not be feasible to use this technology to reap the desired benefits.

10. Prescribed Fire • Objective Hierarchies • Variables & Measures • Problem Structuring • Consequence Table • Influence Diagram • Decision Tree • Mathematical Model • Solutions & Sensitivity Cases

11. Prescribed Fire - Objective Hierarchies

12. Prescribed Fire - Variables & Measures • Decision Variables: • Burn Slash • YUM • Chance Variables • Controlled Fire • Uncontrollable Fire - Escaped Fire • Uncontrollable Fire - Problems • Consequence • Cost Efficient Burn • Escaped Fire • Low Cost Burn • Medium Cost Burn • High Cost Burn

13. Prescribed Fire - Consequence Table

14. Prescribed Fire - Influence Diagram Uncontrolled Fire Controlled Fire Low High Medium Costs Choose Method Cost Efficient Burn

15. Prescribed Fire - Decision Tree

16. Prescribed Fire Solutions & Sensitivity Given the scenario’s, YUM seems to be the most cost efficient method .

17. GPC • Objective Hierarchies • Variables & Measures • Problem Structuring • Consequence Table • Influence Diagram • Decision Tree- NA • Mathematical Model • Solutions & Sensitivity Cases

18. GPC - Objective Hierarchies

19. GPC - Variables & Measures • Decision Variables: • Product A • Product B • Product C • Chance Variables • Delay in production • Price • Sales • Market Share • Consequence • Increased Market Share • Lose Market Share • Increased Return • Reduced Margin

20. GPC - Consequence Table

21. GPC - Influence Diagram Sales Delay Product Maximize Return Choose Product

22. GPC - Mathematical Model Mathematical Models EMVA delay = max (((0.3 * 5) + (0.7 * (-0.5))), ((0.5 * 3.5) + (0.5 * 1))) EMVA no delay = max (((0.4 * 8) + (0.6 * 0)), ((0.5 * 4.5) + (0.5 * 1.5))) EMVA = max (EMVA delay, EMVA no delay ) EMVB = (0.38 * 8) + (0.12 * 4) + (0.5 * 0) EMVC = 1.0 EMV Optimal Decision = max( EMVA, EMVB, EMVC )

23. GPC - Solutions & Sensitivity I was not able to get DPL to draw a decision tree. In any event, if we had more time and information we could have done more analysis. We could have used excel to set up a solver with constraints (upper and lower limits on probability) for products A & B to get a maximized return. We could also have set up a regression model with sales as the dependent variable with delay and price as independent variables to project profits with certain level of confidence. But, given the information we have, I would suggest we go with product B since we are a lot more certain about its out come. The decision will also be impacted by many other factors like the GPC’s financial strength and its position in the market etc.

24. Strenlar • Objective Hierarchies • Variables & Measures • Problem Structuring • Consequence Table • Influence Diagram • Decision Tree • Mathematical Model • Solutions & Sensitivity Cases

25. Strenlar - Objective Hierarchies

26. Strenlar - Variables & Measures • Decision Variables: • Accept Offer • Reject Offer • Chance Variables • Financial/ Physical/ Emotional State • Peer & Social Pressure • Future • Consequence • Rich & Happy • Broke & Miserable • Self Esteem??

27. Strenlar - Consequence Table

28. Strenlar - Influence Diagram Emotional State Financial State Physical State Accept/Reject Offer Maximize Satisfaction

29. Strenlar - Decision Tree

30. Strenlar - Mathematical Model The following diagram, done in Excel, accompanies the mathematical model used by Fred: EMV Lawsuit = (0.6 * ((0.8 * 8,000) + (0.2 * (-200)))) + (0.4 * (-220)) EMVPI job = (0.8 * 2,443) + (0.2 * 343) EMV lump sum = (0.8 * 1,252) + (0.2 * 500) EMV Optimal decision = max ( EMV Lawsuit, EMVPI job, EMV lump sum )

31. Strenlar Solutions & Sensitivity Fred’s position is unenviable. His decision will be influenced by how he feels about himself. I don’t think we can help him make a decision based on the financial outcomes. If Fred was a corporation, we could argue that he should reject the offer and take them to court since maximizing the value of the assets would be his only goal.