Decision Support Tools

DECISION SUPPORT TOOLS
STUDENT ID
[Pick the date]

Question 1
(a) One key advantage that is associated with the use of payoff matrix is that it highlights the
possible payoffs (profit/losses) associated with the various states for the choices that the
decision maker can potentially make. Then, based on the underlying decision making
criterion, a decision can be made with regards to the underlying optimum choice. In order
to facilitate this, there are various steps which are outlined as follows (Eriksson &
Kovalainen, 2015).
First Step: The various states which are uncertain but probabilistic in nature need to be
identified.
Second Step: The potential payoff for each of the choices ought to be identified with regards
to different states that are possible in future.
Third Step: The requisite results ought to be expressed in the form of a matrix with states
along the column and choices across row.
(b) Even though both payoff matrix and decision tree are deployed for decision making but
there are certain scenarios in which one of the methods might be preferred over the other.
One such scenario is sequential decision making where it is essential that parallel decision
making cannot be carried out as the impact of one decision tends to be seen on the next
decision. In such scenarios, it is advisable to use decision trees instead of payoff matrix
(Flick, 2015).
(c) George would select the appropriate alternative based on the type of method used.
(1) The payoff matrix can be formed by considering the given data and information.
(2) George is considered to be an Optimist then he will select maximum value of the
maximum row values of each alternative. Hence, robot 1 will be taken into account.
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(3) George is considered to be a Pessimist then he will select maximum value of the
minimum row values of each alternative. Hence, he should choose third alternative i.e. do
nothing.
(4) George has considered Lapalce Criterion then he will select maximum mean of the mean
value of the row values of each alternative. Hence, robot 1 or robot 2 will be taken into
account because both has same mean.
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(5)George has considered Regret Criterion then he will select minimum value of the
maximumrow value of each alternative. Hence, 2 will be taken into account
(6) George has considered expected monetary value then he will select max EMV from each
of the alternative. Hence, robot 1 will be taken into account
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(7) EVPI
Question 2
(a) Revised prior probabilities
Explanation (Formula view)
(b) Posterior probability
P(S1 | Y1) (From Above) = 0.6279
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