Decision Making Under Uncertainty

This assignment presents a scenario where you need to evaluate various software options (A, B, C, and D) for their suitability based on costs, probabilities of success (P), and probabilities of failure (NP). You are required to analyze these factors and apply decision-making frameworks to determine the most optimal choice. The provided data includes financial costs and likelihoods associated with each software option.

Analytical thinking and
decision-making

Table of Contents
INTRODUCTION...........................................................................................................................1
1. Within the context of an organization the value of decision-analysis....................................1
2. The challenges faced by UWS technical services and the assumption that are made............2
3. Applying decision analysis and developing decision tress.....................................................2
4. Calculation of expected value and the recommendation for the managers of UWS
technical services........................................................................................................................4
5. The strength and weaknesses of the analysis..........................................................................6
6.Influence of the UWS Technical Services engineers changing their initial probability
estimates......................................................................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Analytical thinking can be used in order to make decisions and helps to solve challenges
faster and easier than even before. For the success of any organization the analytical thinking
and effective decision-making is important (Calabretta, Gemser and Wijnberg, 2017.). . In the
analytical thinking the complex or difficult problem is broken down into single and manageable
components. By using the concept of decision-making the best option is being selected from the
other alternatives that are available.
Audience response systems (ARS) is technology company that offers equipment for the
higher education sector across the world. In order to conduct a business one of two organization
that is UWS technical services have received a letter y the company ARS. In this report within
the context of the company value of decision analysis will be discussed. The appropriate
decision-tree will be applied for the options available for the company in this report.
1. Within the context of an organization the value of decision-analysis
In order to address important decisions in a formal manager the decision analysis is the
discipline compromising the philosophy, theory, methodology and professional practice. Many
procedures , methods and tools in order to recognize and represent the important aspects of a
decision are included in the decision analysis. Under the given circumstance the objective of a
decision analysis is to find out the most advantageous alternatives. A variety of tools are been
used in decision analysis in order to examine all the necessary information that would help in
decision-making process. On a decision tree or influence diagram a graphical representation of
alternatives and possible solutions as well as challenged and uncertainties can be created (Chen,
Moskowitz and Shue, 2016. ).
In context of the organization UWS Technical Services the decision analysis will be sued
by this company in order to make effective decision in the selection of platform and software
that is available for the company. All the procedures and tools will be analysed by the company
in order to select the best platform and the software. The cost, estimation of profit on that
particular platform cost will be concerned by the UWS Technical Services in order to make the
selection. The better understanding about any problem that is affected by the organization can be
given through decision-analysis. The available options in the selection of software that is
software A, software B, software C and software D will be evaluated by the company in order
to see that which software will give maximum profit and will have the least cost .In order to
1

figure out the long and short term benefits and drawbacks of the different decision it involved
complex analysis.
2. The challenges faced by UWS technical services and the assumption that are made
ARS is company that offers equipment for the Higher Education across the globe. In
order to support the development of Apps and web-based functionality the company did not have
staff skills set to support. So, the company have sent invitation to the other organizations
technical services which has received that invitation. At a variety of university committee it mus
be considered before this invitation is accepted as any financial loss need to be underwrite by the
university. As the ARS have specified that software should be developed for either of two
platforms that is for app and web-based. So, the challenge is faced by the UWS technical
services in the selection of the platform best platform from the above two (Lechler and Salas,
2017).
The assumption that is being made by the company is that four possible solutions are
outlined. Across the web-based or app platforms these could be applied. The working software
packages will be developed by the UWS technical staff so they have its own likelihood of
success of software package. The software cost and the success rate is being assumed by this
company for all the software packages .The best possible package will be selected by the
company that would provided best possible return. Based on the assumption for the price of two
platforms the decision will be made and then the software will be selected from the assumption
that is made by the company.
3. Applying decision analysis and developing decision tress
2

UWS technical services
The company UWS technical services have used decision tree in order to evaluate all the
possible options available. In the above decision tress it is been shown that firstly in order to
make decision regarding the which platform will cost less for all the software the cost will be
seen and the profits factor. In this for the Apps platform all the software that is software A,
software B, software C and software D will be considered. The profit and the non-profit percent
of each of the software will be considered (Janssen, van der Voor and Wahyudi, 2017.). Here in
the above decision tree it is been shown that for the decision to select app for software A the
3
Apps$30,000
$10,000
Software B
Software C
Software D
Software A
Web- based Sofware A
Software B
Software C
Software D
Likelihoo
d =100%
Cost =
$100,000
$60,000
$50,000
80,000
P=0.85
NP=0.1
5
NP=0.60
P=0.40
P=0.90
NP=0.10
P=0.50
NP=0.50
P=0.80
NP=0.20
P=0.55
NP=0.45
P=0.100

profit is 0.100 and there is no not profit ratio for the software A. Similarly for the software B the
profit will be 0.85 for the app and the no profit will be 0.15 (|Introduction to Decision Trees ,
2017).Similarly for the software C the profit is 0.40 and the not profit for using this software for
the app platform is 0.60.The profit for using this for software D is 0.90 and the non-profit for
using this for app platform is about 0.10.
For the web-based platform also all the software profit and non-profit percentage is
considered. For the software A the profit ration will be full 100% and there is no not profit ratio
in this. For the software B for the web -based platform the profit will be 0.50 and not profit will
be around 0.50.For the software C the profit will be 0.80 and the not profit will be 0.20 for this
platform and for the software D the profit will 0.55 and the not profit will be 0.45.The cost for
making use of web based platform is less in comparison with app-based platform. The web-
based platform cost is $10,000 and the app-based platform is $30,000.The P present that the
profit that is gained and NP present the non-profit that is gained form using this software.
In the above decision tress it is been shown that in order to make effective decision
regarding which platform to be used the company will see the cost of both the apps and also the
likelihood of the success of each software that is software A, software B, software C and
software D.
4. Calculation of expected value and the recommendation for the managers of UWS technical
services
An expected value is the average of all the possible results. If a decision is repeated again
and again it will calculate the average return. By multiplying the value of each possible outcome
by the probability of that outcome and summing the results it is obtained (Hohnisch, Pittnauer
and Pfingsten, 2016. ).
EV =px
The EV for the app based platform for all the software that is for software A,B,C and D will be
as follows-:
EV for app-based platform
Software Profit Not-profit Cost of
software A
Cost of app-
based platform
EV –
Profit*Total
cost (Cost of
4

software
+Cost of app-
platform )+
Not-profit
*total cost
(Cost of
software
+Cost of app-
platform )
Software A 0.100 - $100,000 $30,000 13,000
Software B 0.85 0.15 $60,000 $30,000 90,000
Software C 0.40 0.60 $50,000 $30,000 80,000
Software AD 0.90 0.10 $80,000 $30,000 1,10,000
EV for Web -based platform
Software Profit Not-profit Cost of
software A
Cost of app-
based platform
EV –
Profit*Total
cost (Cost of
software
+Cost of app-
platform )+
Not-profit
*total cost
(Cost of
software
+Cost of app-
platform )
Software A 0.100 - $100,000 $10,000 11, 000
5

Software B 0.50 0.50 $60,000 $10,000 70,000
Software C 0.80 0.20 $50,000 $10,000 60,000
Software D 0.55 0.45 $80,000 $10,000 90,000
As per the Expected value that is been found for both the platform that is for web and app
based and also for all the software it is been recommended for the company to make use of web
based platform as it will be less costly in comparison with app based platform (Chen,
Moskowitz and Shue, 2016. ). The cost of web-based platform is about $10,000 and also for the
software As the estimated profit will be 100% and for the software A for the web-platform the
EV will be 11,000 so it is recommended for the company to make use of software package A for
the web-platform the cost will be less and the profit that will be gained from this will be more.
In the expected value the calculation are done in a simple manner.
The roll-back methods is also known as backward induction. To the terminal value the
rollback is equal at a terminate node. By using the expected value the at an event node the roll
back vale for a risk neutral decision-maker is determined. To the highest rollback value on the
immediate successive node the roll-back value is set at a decision node (Burns, 2016).
5. The strength and weaknesses of the analysis
The strengths of decision tress is that all the possible outcomes of decision can be
considered from it. The likely consequence of one decision against other can be weighed with the
help of decision tree (Calabretta, Gemser and Wijnberg, 2017.). The company UWS technical
service is able to view all the possible outcomes in order to make effective decisions. In order to
make the most informed decision , decision tress help to provide a framework to consider the
probability and payoffs of decision. One of the disadvantages of using decision tress is that
result of decisions and payoffs are based on expectations. When there are few decisions and
outcomes included on the tree the decision tress are relatively easy to understand. The less
correct any expected result to be if there are more decision in a tree. All possible outcomes for an
upcoming choice is been evaluated with help of decision tress. For a variety of situation the
decision tress can be customised .In order to evaluate business or investment alternatives the
decision tress are also helpful.
6

6.Influence of the UWS Technical Services engineers changing their initial probability estimates
For the manager of the company UWS technical services the most important task is to
make decision and it is also not so easy job. The fact of life and business is the uncertainty. In
the decision-making the concept of probability occupies an important place. In the face of
uncertainty most decision are being made by the company. By playing the role of substitute for
certainty probability enters in the process (Bolman and Deal, 2017.).On the application for
probability assessment of uncontrollable events the probabilistic modelling is largely based. The
collection of information about and for the state was the original idea of the statistics. From the
verb to probe meaning “ to find out” the word probability is being derived that is to easily
accessible or understandable. In this the probability and uncertainty helps to calculate which
software will be best for which of the platform. Between what is known and what needs to be
known in order to make an optimum decision the probability assessment quantifies the
information gap. In order to protect against the adverse uncertainty and exploitation of
proportion uncertainty the probabilistic models are used. When the information is scarce,
vague , inconsistent then the difficulty in probability assessment arises. By the conditions of
uncertainty the business decision-making almost always accompanied (Beach and Lipshitz,
2017.). The better decisions will be made if the more information the decision maker has.
Regarding events., states of the world , beliefs etc there can be uncertainties. In order to
communicate uncertainty and managing it the probability is the tools that can be used.
CONCLUSION
Thus summing up the above report it can be concluded that decision-making is a toll that
can be used in order to effective decision in the organization. The decision-trees will be used by
the company in order to make the decision. The company will select the Web-based platform for
the software A. The advantage of decision trees is that all the possible outcomes are being
evaluated by it to make optical decisions.
7

REFERENCES
Books and Journals
Beach, L.R. and Lipshitz, R., 2017. Why classical decision theory is an inappropriate standard
for evaluating and aiding most human decision making. Decision Making in Aviation,
p.85.
Bolman, L.G. and Deal, T.E., 2017. Reframing organizations: Artistry, choice, and leadership.
John Wiley & Sons.
Burns, M.R., 2016. Ethical Decision-Making Examined in Greek Letter Organization Members:
A Case Study.
Calabretta, G., Gemser, G. and Wijnberg, N.M., 2017. The interplay between intuition and
rationality in strategic decision making: A paradox perspective. Organization Studies.
38(3-4), pp.365-401.
Chen, D.L., Moskowitz, T.J. and Shue, K., 2016. Decision Making Under the Gambler’s Fallacy:
Evidence from Asylum Judges, Loan Officers, and Baseball Umpires. The Quarterly
Journal of Economics. 131(3), pp.1181-1242.
Hohnisch, M., Pittnauer, S. and Pfingsten, A., 2016. Designing for Deliberative Goal-Based
Decision Making in Environments with Rare Adverse Events—An Experimental Study.
Organization Science. 27(6), pp.1417-1434.
Janssen, M., van der Voort, H. and Wahyudi, A., 2017. Factors influencing big data decision-
making quality. Journal of Business Research. 70, pp.338-345.
Lechler, T. and Salas, R.E.C., 2017. Editorial overview: Cell architecture: Mechanisms and
scales of cellular organization and decision making.
Online
|Introduction to Decision Trees . 2017. [PDF]. Available through:
<http://treeplan.com/chapters/introduction-to-decision-trees.pdf/>
8