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3.6 case 1 decision theory

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Vishal Tidake
Vishal Tidake

CASE 1: DECISION THEORY

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www.sanjivanimba.org.in Unit No.3. DECISION SCIENCE Presented By: Dr. V. M. Tidake Ph. D (Financial Management), MBA(FM), MBA(HRM) BE(Chem) Dean, EDP & Associate Professor MBA 1 Sanjivani College of Engineering, Kopargaon Department of MBA www.sanjivanimba.org.in
www.sanjivanimba.org.in 302-DECISION SCIENCE Unit No.3. Decision Theory 3.6 Case 1 Decision Theory Presented By: Dr. V. M. Tidake Ph. D (Financial Management), MBA(FM), MBA(HRM) BE(Chem) Dean EDP & Associate Professor MBA 2 Sanjivani College of Engineering, Kopargaon Department of MBA www.sanjivanimba.org.in
www.sanjivanimba.org.in DECISION THEORY  At the End of the Session Student will be able to understand- A. Case 1: Decision Theory
www.sanjivanimba.org.in Case 1: Decision Theory Suresh finds the probability of Demand distribution of Luxury Car S as follows- The selling price of car is Rs. 10,00,000 and it costs to Suresh Rs. 6,00,000. Suresh has always followed a rule for Initial purchase- purchase 3 cars. Find the expected daily profit under the decision rule of buying the three cars each morning. If fees for perfect information is Rs. 1,00,000. Calculate the expected monetary value of the venture with perfect Information. Probability of Demand 0.2 0.4 0.1 0.3 Demand of Car each day 1 2 3 4
www.sanjivanimba.org.in Case 1: Decision Theory Let, N1- State that the demand is 1 N2- State that the demand is 2 N3- State that the demand is 3 N4- State that the demand is 4 And, S1- Strategy of Buying 1 car S2- Strategy of Buying 2 car S3- Strategy of Buying 3 car S4- Strategy of Buying 4 car
www.sanjivanimba.org.in Case 1: Decision Theory STRATEGIES STATES OF NATURE/DEMAND N1 (0.2) N2 (0.4) N3 (0.1) N4 (0.3) S1 S2 S3 S4
www.sanjivanimba.org.in Case 1: Decision Theory STRATEGIES STATES OF NATURE/DEMAND N1 (0.2) N2 (0.4) N3 (0.1) N4 (0.3) S1 4 4 4 4 S2 -2 8 8 8 S3 -8 2 12 12 S4 -14 -4 6 16
www.sanjivanimba.org.in Case 1: Decision Theory Answer: a. Expected Daily Profit under the decision rule of buying three cars each day is S3 i.e. Rs. 4 Lac b. The Optimal strategy is Strategy S2 i.e. Buying 2 cars each day c. EMVPI = (0.2*4) + (0.4*8) + (0.1*12) + (0.3*16) = 10 Lac d. VPI= 10 Lac – 6 Lac = 4 Lac STRATEGIES STATES OF NATURE/DEMAND N1 (0.2) N2 (0.4) N3 (0.1) N4 (0.3) EMV S1 4 4 4 4 (0.2*4) + (0.4*4) + (0.1*4) + (0.3*4) = 4 S2 -2 8 8 8 6 ← Max S3 -8 2 12 12 4 S4 -14 -4 6 16 1
www.sanjivanimba.org.in EXERCISE  State and Explain Case 1: Decision Theory.
www.sanjivanimba.org.in For More Details Contact Dr. V M Tidake tidkevishal@gmail.com tidkevishalmba@sanjivani.org.in
www.sanjivanimba.org.in Thank You

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3.6 case 1 decision theory

  • 1. www.sanjivanimba.org.in Unit No.3. DECISION SCIENCE Presented By: Dr. V. M. Tidake Ph. D (Financial Management), MBA(FM), MBA(HRM) BE(Chem) Dean, EDP & Associate Professor MBA 1 Sanjivani College of Engineering, Kopargaon Department of MBA www.sanjivanimba.org.in
  • 2. www.sanjivanimba.org.in 302-DECISION SCIENCE Unit No.3. Decision Theory 3.6 Case 1 Decision Theory Presented By: Dr. V. M. Tidake Ph. D (Financial Management), MBA(FM), MBA(HRM) BE(Chem) Dean EDP & Associate Professor MBA 2 Sanjivani College of Engineering, Kopargaon Department of MBA www.sanjivanimba.org.in
  • 3. www.sanjivanimba.org.in DECISION THEORY  At the End of the Session Student will be able to understand- A. Case 1: Decision Theory
  • 4. www.sanjivanimba.org.in Case 1: Decision Theory Suresh finds the probability of Demand distribution of Luxury Car S as follows- The selling price of car is Rs. 10,00,000 and it costs to Suresh Rs. 6,00,000. Suresh has always followed a rule for Initial purchase- purchase 3 cars. Find the expected daily profit under the decision rule of buying the three cars each morning. If fees for perfect information is Rs. 1,00,000. Calculate the expected monetary value of the venture with perfect Information. Probability of Demand 0.2 0.4 0.1 0.3 Demand of Car each day 1 2 3 4
  • 5. www.sanjivanimba.org.in Case 1: Decision Theory Let, N1- State that the demand is 1 N2- State that the demand is 2 N3- State that the demand is 3 N4- State that the demand is 4 And, S1- Strategy of Buying 1 car S2- Strategy of Buying 2 car S3- Strategy of Buying 3 car S4- Strategy of Buying 4 car
  • 6. www.sanjivanimba.org.in Case 1: Decision Theory STRATEGIES STATES OF NATURE/DEMAND N1 (0.2) N2 (0.4) N3 (0.1) N4 (0.3) S1 S2 S3 S4
  • 7. www.sanjivanimba.org.in Case 1: Decision Theory STRATEGIES STATES OF NATURE/DEMAND N1 (0.2) N2 (0.4) N3 (0.1) N4 (0.3) S1 4 4 4 4 S2 -2 8 8 8 S3 -8 2 12 12 S4 -14 -4 6 16
  • 8. www.sanjivanimba.org.in Case 1: Decision Theory Answer: a. Expected Daily Profit under the decision rule of buying three cars each day is S3 i.e. Rs. 4 Lac b. The Optimal strategy is Strategy S2 i.e. Buying 2 cars each day c. EMVPI = (0.2*4) + (0.4*8) + (0.1*12) + (0.3*16) = 10 Lac d. VPI= 10 Lac – 6 Lac = 4 Lac STRATEGIES STATES OF NATURE/DEMAND N1 (0.2) N2 (0.4) N3 (0.1) N4 (0.3) EMV S1 4 4 4 4 (0.2*4) + (0.4*4) + (0.1*4) + (0.3*4) = 4 S2 -2 8 8 8 6 ← Max S3 -8 2 12 12 4 S4 -14 -4 6 16 1
  • 9. www.sanjivanimba.org.in EXERCISE  State and Explain Case 1: Decision Theory.
  • 10. www.sanjivanimba.org.in For More Details Contact Dr. V M Tidake tidkevishal@gmail.com tidkevishalmba@sanjivani.org.in