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Ms4...Introduction to Modeling - Part 4

The document outlines the importance of cost/benefit considerations in selecting decision models, distinguishing between deterministic and probabilistic models. It details the steps involved in decision modeling, including problem formulation, model development, data acquisition, solution testing, and implementation. Additionally, it highlights potential problems that may arise during each step, such as conflicting viewpoints, data quality issues, and resistance to change.

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dilaraarslan2003
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3 views

Ms4...Introduction to Modeling - Part 4

The document outlines the importance of cost/benefit considerations in selecting decision models, distinguishing between deterministic and probabilistic models. It details the steps involved in decision modeling, including problem formulation, model development, data acquisition, solution testing, and implementation. Additionally, it highlights potential problems that may arise during each step, such as conflicting viewpoints, data quality issues, and resistance to change.

Uploaded by

dilaraarslan2003
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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• Cost/benefit considerations must be made

in selecting an appropriate model.

• Frequently a less complicated (and


perhaps less precise) model is more
appropriate than a more complex and
accurate one due to cost and ease of
solution considerations.
Types of Decision Models

Decision
Models

Deterministic Probabilistic
Models Models
• Deterministic models assume
• Complete certainty.
• All information needed is available with fixed and
known values.
• Most commonly used deterministic modeling
technique is Linear Programming
• Probabilistic models are also called
stochastic models.
• Probabilistic models
• assume some of data is not known with
certainty.
• take into account information will be known
after decision is made.
Steps in Decision Modeling

1. Formulation.

2. Solution.

3. Interpretation.
Steps in Decision Modeling
• Defining the problem
• Develop clear and concise problem statement
• Do not solve the wrong problem

• Developing a model
• Select and develop a decision model
• Select appropriate problem variables
• Develop relevant mathematical relation for
consideration and evaluation
Steps in Decision
Modeling
• Acquiring input data
• Collect accurate data for use in model.
• Possible data sources are:
• Official company reports.
• Accounting, operating, and financial information.
• Views, and opinions from knowledgeable
individuals.
Steps in Decision
Modeling
• Developing a solution
• Solution of set of mathematical expressions
• Alternative trial and error iterations
• Complete enumeration of all possibilities
• Utilization of an algorithm/heuristic
• Series of steps repeated until satisfactory solution
is attained
Steps in Decision
Modeling
• Testing a solution
• Prior to implementation of model solution,
testing solution.
• Testing of solution is accomplished by
examining and evaluating:
•Data utilized in model by acquiring new data
•The model itself
Steps in Decision
Modeling
• Interpretation and What-if Analysis
(Analyzing the results and sensitivity
analysis)
• Make changes in input data and model
specifications, and examine differences in
various optimal solutions
Steps in Decision
Modeling
• Implementing the results
• Optimal solution must be interpreted carefully
•Do not forget the assumptions
•Model is not the real problem
•Optimal solution is there to give insight
• Solution implementation usually requires making
changes within the organization
• Recommendations often require changes in data,
data handling, resource mixes, systems,
procedures, policies, and personnel
Possible Problems
in Decision Modeling
• Defining the problem
• Conflicting viewpoints
• Impact on other departments
• Real life is too ambiguous– a jungle
• Beginning assumptions
• Problems that change quickly

• Developing a model
• Fitting textbook models
• Understanding/accepting a model
Possible Problems
in Decision Modeling
• Acquiring data
• Availability
• Accesibility
• Relevance
• Quality
• Missing data
• Developing a solution
• Complex mathematics
• Giving only-one answer (insight is important)
• Failing to remember there are assumptions
Possible Problems
in Decision Modeling
• Testing the solution/analyzing
results/implementing results
• Problems about realization/implementation
• Time dimension (no immediate effects)
• Resistance for change

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