Scenario: You are a business owner faced with an important decision that could p

Question

Scenario: You are a business owner faced with an important decision that could potentially be very lucrative. Keep in mind the “Six Steps in Decision Making” (textbook reference) as you set up your decision analysis.

1.) What is the problem and objective of this decision?

2.) Identify at least three alternatives and three states of nature. Create a decision table in Excel QM.

3.) What are the potential payoff/losses for each alternative and state of nature?

5.) Choose two of the five decision strategies, and solve it in Excel QM. State the best alternative for each strategy.

Optimistic

Pessimistic

Criterion of realism (Hurwicz)

Equally likely (Laplace)

Minimax regret

6.) Why did you choose the two strategies? What are the results of the best alternative? What is your final decision?

Explanation / Answer

1. Problems in six step decision making :

Objectives of this decision :

The six step decision making is utilised extensively in organizations. Traditional ethical decision making models can be incredibly complex. These have been simplified to a simple six step decision making process so that employees can be empowered to make decisions appropriate to their rank and responsbility.

2. The three states of nature are :

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