Decisions, Decisions, Decisions!
Scenario: You are a business owner faced with an important decision that could potentially be very lucrative. Keep in mind the six steps in decision making as you set up your decision analysis.
Main Post: For this discussion, you will be asked to compose an essay to address the following questions:
1. Create a scenario in which your business needs to make a decision.
2. Identify at least three alternatives and three states of nature for the decision.
3. Create a decision table in Excel that includes:
· the alternatives
· the states of nature
· the potential payoff/losses for each alternative
· Note: These fictitious amounts should be based on any information you feel is pertinent in your business decision-making.
4. Include the payoff table in the essay and as an attachment to the Discussion Board.
5. Choose one of the three decision strategies:
· Criterion of realism
6. For the decision strategy chosen above:
· List the best payoff.
· List the alternative to use based upon the payoff.
· State why the decision strategy was chosen.
7. Indicate your final decision.
After you have contemplated the questions above, write your essay, including the answers to all of the questions above. All essays should:
· have an introduction paragraph.
· have three or more body paragraphs.
· end with a conclusion paragraph tying all of your ideas together, stating the final decision made and why that decision was reached.
The essay should be at least five paragraphs in length.
for a payoff table and starter phrases for an essay. You can also view a Discussion Board starter video to assist you with the Unit 3 Discussion Board in the
Unit 3 LiveBinder
Peer Reply 1: Choose a classmate’s thread and review their decision analysis table.
1. Add to their table by choosing a risk level for each state of nature (assign a probability value to each).
2. Calculate and state the expected monetary value (EMV) for each alternative.
3. Discuss which alternative is best based on the maximum EMV.
4. Calculate and state the expected value with perfect information (EVwPI).
5. Calculate and state the expected value of perfect information (EVPI).
6. Discuss the most money your classmate should pay for perfect information.
for a calculation of Expected Monetary Value (EMV), Expected Value with Perfect Information (EVwPI), and Expected Value of Perfect Information (EVPI).
My business needs to make a decision on the size of our workforce for building and maintaining our systems powerlines. To make this decision we will need to weigh all of the steps in the decision-making strategy. These steps weigh multiple areas including identifying the problem, and listing the choices available to us, otherwise known as alternatives. We must also identify states of nature that may impact the outcome of the decisions alternatives. With this information we can make an educated guess or a estimate of the potential payoffs. Then proceeding to choose the decisions theory environment and strategy. The final step will be to apply our model and make our decision.
We have a few options, or alternatives to choose from in this decision making process. We can either hire more crews and take on the expenses of more employees with health insurance, and 401k expenses. Or we can contract the work out to other companies and keep them employed in an as needed status. Or we can simply continue to operate with our current workforce and have no change. Each alternative can have its own impact on the decision and come with its costs or benefits.
Our states of nature in this line of work will be all about demand and workload. Demand can be high, where there is a lot of new construction of homes and businesses needing new lines constructed. Or needing old lines retrofitted to handle the new load. The medium demand will still be seeing growth but not so much on the retrofitting lines which is an in depth time consuming process. Our low demand will be mostly our maintenance operations and the occasional new build that needs our services.
With the information in the table the decision strategy will be with an optimistic approach. Also know as the maximax strategy, it is the most aggressive approach looking for the highest payoff out of all the alternatives. In this case the highest payoff is to have contracted crews when the demand is the highest. There will be more profit made with more work being done and contractors absorbing most of the housekeeping costs of their labor we are hiring.
After applying all of the steps in the decision making strategy and using all of the information available to us our final decision is to hire contracted crews, the payoff is much higher when the demand is at its highest since they can complete the most work, ultimately generating us the most revenue. The maximax strategy seems the best for future revenue, current growth, and meeting the obligations of providing power to our service area.
Peer Reply 2:
Choose another classmate’s thread and review their decision process. Further the math conversation by taking on the role of the business partner.
· Would you agree or disagree with their decision strategy?
· Are there any factors that have been overlooked that would affect their decision process?
· Would you choose the same decision strategy under uncertainty?
for starter phrases relating to your classmate’s decision analysis.
General discussion reminders:
· Due to the nature of the posts for the course, it is possible you will go over the character limit. In the event that happens, consider attaching an Excel spreadsheet or Word document to share part or all of your response.
· Keep in mind that when you post, you should include a citation and reference any time you are quoting or paraphrasing the textbook, a classmate’s post, or other material (including datasets).
· Adhering to the rubrics is the best way to maximize your score. Note: Replying to yourself to add to a post to make corrections, etc. will not be considered a peer reply.
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