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204 DS Notes Unit 3

This document contains notes from a class on Decision Science. It discusses several key concepts: 1) Queuing theory deals with analyzing queues and optimizing service functions given random arrival and service times. Common queuing situations include customers waiting to be served at banks or parts waiting to be processed. 2) Game theory analyzes interactions between competing entities. Key concepts include players, strategies, payoffs, and zero-sum vs. non-zero-sum games. 3) Decision theory is about selecting the best course of action from alternatives to meet objectives. It involves defining problems, collecting data, evaluating alternatives, and implementing decisions. Models include decision-making under certainty, risk, and uncertainty.

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38 views

204 DS Notes Unit 3

This document contains notes from a class on Decision Science. It discusses several key concepts: 1) Queuing theory deals with analyzing queues and optimizing service functions given random arrival and service times. Common queuing situations include customers waiting to be served at banks or parts waiting to be processed. 2) Game theory analyzes interactions between competing entities. Key concepts include players, strategies, payoffs, and zero-sum vs. non-zero-sum games. 3) Decision theory is about selecting the best course of action from alternatives to meet objectives. It involves defining problems, collecting data, evaluating alternatives, and implementing decisions. Models include decision-making under certainty, risk, and uncertainty.

Uploaded by

Jayasri Murali
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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MBA@IICMR – Pune 44

MBA SEM II

Paper No. 204


Subject: Decision Science

Subject Teacher: Prof. Vidhya Hittalmani

Notes Unit 3
Queuing Theory
Queuing Theory deals with the analysis of queues and queuing behavior and is used for finding
the solution of the problems so that the effectiveness of the service function is optimized given
that the arrival and servicing times are random

Waiting time situations


 Computer programs are waiting to be processed at a Computer centre
 Customers are waiting to be served at a bank window
 Parts are waiting to be processed at a manufacturing operation
 Machines are waiting to be repaired at a maintenance shop
 Trucks are waiting to unload their cargo at an unloading dock

Service
Facility

Input Served
process customers

Customers in queue

Customers may not


enter the queue

Queuing System
Elementary Queuing System
A. Input process (or Arrival Pattern)
B. Queue (Waiting line)
C. Service Facility (Server)
D. Departure

Input process (or Arrival Pattern)


• Size: Finite or infinite
• Arrival time: Constant or random. The most commonly used random distribution is the
Poisson Exponential distribution with mean Arrival rate as λ
• Customers behaviour: i) Stay in the system, ii) leave the system iii) join the queue and
start demanding service iv) move from queue to another

Queue (Waiting line)


It refers to the customers waiting for service and excludes those being served
Characteristics relevant to Queue
o Waiting time: time spent by the customer in the queue before being served
o Service time: time spent by the server to render service to the customer
o Waiting time in the system: total time spent by the customer in the system (waiting time
+ service time)
o Queue length: number of customers waiting in the queue
o System length: number of customers in the System

Service Facility (Server)


1. Arrangement: Arrangement may be in series and in parallel. Thus we have
i) Single queue-single server
ii) Single queue-multiple server (series)
iii) Single queue-multiple server (parallel)
iv) Multiple queue-multiple server
Service time distribution: constant or random. In most of the situations, the service time follows
a negative exponential distribution with mean service time 1/μ. Average service rate= μ

3. Service discipline: if the server is free, the arriving customers are served immediately. If a
server is busy, the customers are selected in random or in order of their of arrival or by assigning
probabilities
Departure
On receiving the service completely, the customers depart from the system

Single queue-single server


Assumptions made:
 Number of arrivals per unit time is described by Poisson distribution
 Service times are described by Negative Exponential distribution
 Queue discipline is first come first served
 There is only one channel and only one queue
 Population is infinite
 Waiting space for the customers is infinite
 Mean arrival rate (λ) < Mean service rate μ()

Single queue-multiple server (parallel)


Assumptions made:
 Queue discipline is first come first served
 All service facilities provide the same service rate
 Arrivals follow Poisson probability distribution while the service times are exponentially
distributed
 Population is infinite
 Arrival rate is less than the combined average service rate of all the servers

Game Theory
Game Theory deals with such problems where actions and interactions of competing firms give
rise to conditions of business conflict

Terminology of Game Theory

 Players: The participants to the game who act as decision makers are called as players
 Strategies: A finite number of possible courses of action available to a player are called
strategies
 Play: A play occurs when each player selects one of his strategies
 Payoff: Every combination of strategies of players determines an outcome called payoff
 Payoff matrix: The gains resulting from a game if presented in the form of a table is
called,” Payoff matrix “

 Maximin: A maximum element among the row minima is called maximin


 Minimax: A minimum element among the column maxima is called minimax
 Saddle point: A saddle point is that element of the matrix, which represents the
“maximin” value of a player and “minimax” value of his opponent.

 Two person game: when there are only two competing parties, one opposing the other,
the game is Two person game
 Multiple person game: when there are more two competing parties, the game is Multiple
person game

 Two person zero sum game: The game in which gain of one player is loss of other
player is Two person zero sum game
 Two person non zero sum game :In this the players inspite of opponent can also be
partners

 Pure strategy game: It is a decision of the player to always select the same strategy
 Mixed strategy game: It is the decision of the player, in advance of the play to select
more than one strategy with fixed probabilities

 Value of the Game: Value of the Game is the “Expected gain to a player” if he and his
opponent use their best strategies

Pure Strategy Game for m Χ n game


Game with Saddle Point

Mixed Strategy Game for 2 Χ 2


(Game without saddle point)

Algebraic Method (Ratio method)


 Probability of player A to select Strategy 1= X
 Probability of player A to select Strategy 2 = 1-X
 Probability of player B to select Strategy 1 = Y
 Probability of player B to select Strategy 2 = 1-Y

Then Strategies are,


Strategies of player A = (X, 1-X)
Strategies of player B = (Y, 1-Y)

Dominance Method to reduce mixed strategy game


“Dominance Method specifies the rules to be followed to eliminate strategies without affecting
the final solution”

“A strategy is said to dominate another strategy if all of its possible outcomes are preferable”

For Player A
Dominance exists when every element in a row (called dominating row) is higher than or equal
to the corresponding elements of another row (called dominated row)

For Player B,
Dominance exists for opponent when every element in a column (called dominating column) is
lower than or equal to the corresponding elements of another column (called dominated column)

Decision Theory
Decision making is a process of selecting from a set of alternative courses of action, that course,
which best meets the objectives of the decision problem, as compared to the others as judged by
the decision maker

Main characteristics of decision-making


 Decision is the end product of deliberations and logical reasoning
 Decision is the selection of the best course of action among the available alternatives
 Decision involves evaluation of the alternatives
 Decision aims at achieving the objectives of the Organisation
 Decision making involves commitment of the decision of the decision maker
 Decision at times may be negative

Elements of Decision making problem


Decision maker: Decision maker is an individual or group of individuals who make the decision
Courses of Action or Strategies
These are various options available to the decision maker for solving the problem
States of Nature or Outcomes
These are the events, which indicate the occurrences which are not under the decision makers
control and which determine the level of success for the given strategy
Pay Off
Each combination of a course of action and a state of nature is associated with a pay off which
indicates the net gain to the decision maker for that combination
Pay Off table
It lists a set of pay offs for the given strategies along with all the states of nature that are
mutually exclusive and collectively exhaustive
Regret/ Opportunity loss/ Regret matrix
Under a certain event out of many actions we will choose the action, which gives maximum
profit. If by chance or by some other reason we could not choose that action and we require to
choose some another action then how much we require to loose or how much profit will be
reduced is called Opportunity loss or Regret

Steps in the Decision making process


1. Diagnose/ Define the problem
2. Collection of the relevant data
3. Develop various alternatives for solving the problem
4. Evaluation of these alternatives in light of the solution objective using a suitable criterion
5. Select the best alternative
6. Implement the selected decision

Decision Models
 Decision making under Certainty
 Decision making under Risk
 Decision making under Uncertainty
 Decision making under Conflict

Decision making under Certainty`


Decision-making under Certainty is where the consequences of each course of action are
certainly known and there is only one state of nature

Decision making under Risk


In this there are several states of nature and the probabilities of occurrences for each state are
known

Decision making under Uncertainty


Here the probabilities of occurrences for each state are not known
Decision making under Risk
A. Expected Monetary Value Criterion (EMV)
B. Expected Value with Perfect Information (EVPI)
C. Value with Perfect Information (VPI)

Decision making under Uncertainty


A. Maximin (gain) or Minimax (loss)
B. Maximax (gain) or Minimin (loss)
C. Laplace Criterion
D. Minimax Regret Criterion

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