Decision Analysis (DA) - Assignment

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Abu Dhabi School of ManagementDecision AnalysisGroup out of Class assessmentMay 2018
Q1A company runs a social media platformCourses of action; sell the users dataPerform the analysisIf the firm perform the analysis there is 2/3 probability of obtaining an interesting pattern.Data analysis process cost $ 100,000The payoff tableCourses of actionsStates of natureObtaining apatternNo patternSell the users data$ 50,000$ 50,000Perform the analysis$ 300,000($ 100,000)Probability2/31/3Optimal decision under the Maximax CriterionCourses of actionsStates of natureObtaining apatternNo patternMaxSell the users data$ 50,000$ 50,000$ 50,000Perform the analysis$ 300,000($ 100,000)$ 300,000Probability2/31/3The optimal decision is to perform the analysisOptimal decision under the Maximin CriterionCourses of actionsStates of natureObtaining apatternNo patternMinSell the users data$ 50,000$ 50,000$ 50,000Perform the analysis$ 300,000($ 100,000)$ (100,000)Probability2/31/3The optimal decision will be to sell the data to a data analysis firmOptimal decision under the Regret Criterion
The regret tableCourses of actionsStates of natureObtaining a patternNo patternMaximumSell the users data($ 250,000)$ 0$ 0Perform the analysis$ 0$ 150,000$ 150,000Probability2/31/3The optimal decision will be to sell the data to a data analysis company.Optimal decision under the Maximum Likelihood CriterionCourses of actionsStates of natureObtaining apatternNo patternSell the users data$ 50,000$ 50,000Perform the analysis$ 300,000($ 100,000)Probability2/31/3The optimal decision is for the company to undertake the analysis.Optimal decision based on the expected Value CriterionCourses of actionsStates of natureObtaining apatternNo patternExpected valueSell the users data$ 50,000$ 50,000$ 50,000Perform the analysis$ 300,000($ 100,000)$ 166,666.67Probability2/31/3The optimal decision is for the company to undertake the analysisA company can hire a consultant before the analysis to gauge the possible behavior of theirdata. The expense of hiring a consultant is $ 20,000.A drawing a decision treeSignifies course of actionSignifies states of nature interesting$ 280,0000.50.4 Not interesting($ 20,000)
Successful 0.5Hire Not successful useless data($20,000)0.5 0.6 6/7Useful 1/7Not hire 0.5 interesting $ 280,000$ 280,0002/3Not interesting1/3 ($ 120,000)From the decision tree hiring a consultant before doing the analysis gives an expectedreturn of $ 65,714Failing to hire a consultant prior to conducting the analysis gives an expected return of$ 146,666.67The expected value of doing the analysis is $ 106,190.48Receiving a higher offer of $ 70,000 to sell the data does not change the nature of thedecision tree.The decision tree will remain asinteresting$ 280,0000.50.4 Not interesting($ 20,000)Successful 0.5Hire Not successful useless data($20,000)0.5 0.6 6/7Useful 1/7
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