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L1 - Introduction To Decision Science

This document provides an introduction to decision science and operations research. It discusses how decisions can be analyzed using tools like spreadsheets to model potential outcomes. Operations research uses quantitative approaches to solve complex management problems. An example is provided of how queueing analysis and simulation were used to address long wait times at a fast food restaurant. The document outlines the modeling approach to problem solving, characteristics of models, and categories of mathematical models. Finally, it discusses the psychology of decision making, including anchoring effects and framing effects.

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Aniel John Santarin
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Download as PPTX, PDF, TXT or read online on Scribd
175 views

L1 - Introduction To Decision Science

This document provides an introduction to decision science and operations research. It discusses how decisions can be analyzed using tools like spreadsheets to model potential outcomes. Operations research uses quantitative approaches to solve complex management problems. An example is provided of how queueing analysis and simulation were used to address long wait times at a fast food restaurant. The document outlines the modeling approach to problem solving, characteristics of models, and categories of mathematical models. Finally, it discusses the psychology of decision making, including anchoring effects and framing effects.

Uploaded by

Aniel John Santarin
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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ADAMSON UNIVERSITY

Graduate School
Department of Chemical Engineering

LECTURE 1
Introduction to Decision Science

Engr. Reiniel Davis Bandong, AAE


Lecturer
INTRODUCTION
 Decisions in life and Professional Settings.
 Analysis through the use of equipment and
tools to analyze the potential outcomes of
decision alternatives.
 Common tool of choice for usage is the
Spreadsheets.
 Readily available and the least expensive
 Other Tool : Minitab, Design Expert
OPERATIONS RESEARCH

 Also known as the Management Science and


Decision Science.
 Multidisciplinary quantitative approach to
complex management problems.
 A field of study that uses computers, statistics
and mathematics to solve problems in a variety
of settings.
 As the name implies “Research on Operations”
 Application of Engineering on conducting and
coordinating the operations within the
organization.
EXAMPLE OF OR APPLICATION

PROBLEM
People complaining about long queues in a fast
food restaurant.

The OR Team sees a waiting-line problem and


suggests queueing analysis and simulation to
solve it.

ACTUAL SOLUTION
Addition of additional Counters during peek
hours.
COMPUTER MODEL
 A set of mathematical relationships and
logical assumptions implemented in a
computer as a representation of real-world
object of phenomenon.
 Example is Spreadsheets which provide the
most convenient way for Engineers to build
computer model.
THE MODELING APPROACH TO
PROBLEM SOLVING
 Use of models to make decisions.
 Types of models:
 Mental (i.e. arranging furnitures)
 Visual (i.e. blueprints, road maps)
 Physical/Scale (i.e. aerodynamics,
buildings)
 Mathematical (focus of Decision Science)
CHARACTERISTICS OF MODELS
 Models are usually simplified versions of the
things they represent.
 A valid model accurately represents the
relevant characteristics of the object or
decision being studied.
 Modeling – use of mathematical language to
describe a system

A model is an approximation of reality that


attempts to capture its most important
characteristics.
CHARACTERISTICS OF MODELS
 The objective is to keep the model as simple
as possible. Too much detail can make it
hard to get accurate information.

 A valid model accurately represents the


relevant characteristics of the object or
decision being studied.
 Modelling – use of mathematical language to
describe a system

A model is an approximation of reality that


attempts to capture its most important
characteristics.
BENEFITS OF MODELING

 Economical
 Timeliness
 Feasibility
 Improves the understanding and insights on
decision making.
EXAMPLE OF A MATHEMATICAL MODEL

𝐏𝐫𝐨𝐟𝐢𝐭 = 𝐑𝐞𝐯𝐞𝐧𝐮𝐞 − 𝐄𝐱𝐩𝐞𝐧𝐬𝐞


or

𝐏𝐫𝐨𝐟𝐢𝐭 = 𝐟 𝐑𝐞𝐯𝐞𝐧𝐮𝐞, 𝐄𝐱𝐩𝐞𝐧𝐬𝐞𝐬


or

𝐘 = 𝐟 (𝐗 𝟏 , 𝐗 𝟐 )
GENERIC MATH MODEL

Y = f(X1, X2, …, Xn)


Where:

Y = dependent (response) variable


(aka bottom-line performance measure)

Xi = independent (explanatory) variables


(inputs having an impact on Y)

f(.) = function defining the relationship between the


Xi & Y
PROBLEM SOLVING PROCESS

Identify Formulate &


Problem Implement Analyze Test Implement
Model Model Results Solution

unsatisfactory
results
CATEGORIES OF MATHEMATICAL
MODELS

Model Independent OR/MS


Form of f()
Category Variable Techniques

Known or
LP, Networks,
Known, well- under decision
Prescriptive IP, CPM, EOQ,
defined maker’s
NLP
control
Known or Regression
Unknown, ill- under decision Analysis, Time
Predictive
defined maker’s Series,
control Analysis
Simulation,
PERT,
Known, well- Unknown or
Descriptive Inventory
defined uncertain
Models,
Queueing
PSYCHOLOGY OF DECISION MAKING

 Models are used for technical aspects of


decision problems
 Some aspects cannot be modeled easily, like
when it is requiring intuition and judgement
 INTUITION – ability to know something
directly without analytic reasoning.
 JUDGMENT – ability to make decisions
based on the evaluated evidences

Judgement and Intuition is not always rational.


ANCHORING EFFECTS

 When trivial factors influence initial


thinking about a problem.
 Decision-makers usually under-adjust
from their initial “anchor”.
 Is a cognitive bias that heavily rely on the
first piece of information offered when
making decisions[3]
FRAMING EFFECTS

 Decision-makers view alternatives in a


problem, often from a win-loss
perspective.
EXAMPLE:

You will be given $ 10 Million and must choose


between:

A. Give $ 3 Million immediately

B. Flip a coin and give back $ 0 if heads occurs or


give back $ 5 Million if tails occurs.
FRAMING EFFECTS

 Decision-makers view alternatives in a


problem, often from a win-loss
perspective.
EXAMPLE:

You will be given $ 10 Million and must choose


between:

A. Give $ 3 Million immediately

B. Flip a coin and give back $ 0 if heads occurs or


give back $ 5 Million if tails occurs.
DECISION TREE FOR THIS EXAMPLE

PAYOFFS
$ 7 Million
Alternative A

Initial State
Heads (50%)
$ 10 Million
Alternative B

Tails (50%)
$ 5 Million
GOOD DECISIONS VS GOOD OUTCOME

 Good Decisions will not always


lead to good outcomes.
 A structured, modeling approach to
decision making help us make
good decisions, but cannot
guarantee good outcomes.
REFERENCES
[1] Ragsdale, Cliff. A Practical Introduction to Management Science – 5th
Edition.
[2] Lu, Raymond. Introduction to Operations Research. Department of
Industrial Engineering and Operations Research, University of the
Philippines Diliman, Quezon City.
[3] Staff, Pon. (2018). Example of the Anchoring Effects and How it impacts
your Negotiation. Negotiation Skills. Recovered 13-August-2018

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