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DISC 321: DECISION ANALYSIS


FALL 2014
Instructor
Room No.
Office Hours
Email
Telephone
Secretary/TA
TA Office Hours
Course URL (if any)
COURSE BASICS
Credit Hours
Lecture(s)
Recitation/Lab (per week)
Tutorial (per week)

Kamran Ali Chatha


4-36, 4th Floor, SDSB Building
M/W 12:30 to 2:30pm (prayer break included)
kamranali@lums.edu.pk
042 3560 8094
TBA
suraj.lums.edu.pk

4
Nbr of Lec(s) Per Week
Nbr of Lec(s) Per Week
Nbr of Lec(s) Per Week

Duration
Duration
Duration

110 minutes

COURSE DISTRIBUTION
Core
Core
Elective
Open for Student
Category
Close for Student
Category
COURSE DESCRIPTION (BRIEF)
Decision Analysis is a branch of science that focuses on utilizing quantitative techniques for the purpose for making
sound managerial decisions under various forms of constraints (economic, temporal and behavioral). This course
exposes students to the concepts, methods and techniques of decision analysis to conceptualize real world managerial
problems, analyze them and find workable solutions. The course covers topics such as: decision trees, decision making
under uncertainty, value of information, risk analysis using Monte Carlo simulation, risk attitude, multi-objective
decisions, optimization models, matrix games, negotiation analysis to name a few. A real world project and written case
analyses provide avenues for practical learning.
COURSE DESCRIPTION (ELABORATE)
Major objectives of this course are:
(1) To understand basic concepts, methods and techniques of decision analysis;
(2) To develop a capability to use quantitative techniques (in relation to decision analysis) for analyzing and solving real
world managerial problems;
(3) To have a hands on experience of developing spreadsheet models (using Microsoft Excel and an add-on software
namely Palisade Suite) for modeling and analyzing decisions;
Decision Analysis / Science is a branch of science that focuses on utilizing quantitative techniques for the purpose for
making sound managerial decisions under various forms of constraints (economic, temporal and behavioral) faced in the
real world problems. These problems may belong to an organziations functional areas such as finance, operations,
engineering, HRM and marketing functions etc. The problems may also be interdisciplinary in nature in which case
function or discipline specific techniques when applied to solving these problems may not necessarily result into holistic
or practical solutions. In such scenarios the techniques developed within the discipline of decision analysis may provide
broader frameworks and concepts that render practical solutions to such problems.

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There are numerous examples in various disciplines where decision analysis concepts are needed for making sound
decisions, for example in software engineering (e.g. decision about choosing one technology or process over the other),
legal decisions (e.g., understanding the effects of economic pressures on attributions of responsibility), risk assessments
(e.g., assessing risks of nuclear power or missile tests), marketing (e.g. launching specific product in a market) and
managerial decision making (e.g., correcting biases in the assessment of risk). The decision analysis concepts and
frameworks are equally applicable in problems belonging to many other disciplines as well.
Decision analysis relies heavily on decision theory which is concerned with identifying values of different alternatives,
uncertainties involved, their utilities, and other issues relevant to a given decision, its rationality, and the resulting
optimal decision. In order to exercise these concepts decision theory borrows some of the concepts from probability
theory.
In order to achieve aforementioned objectives two major steps have been taken while designing the course: (1) a number
of real world case studies are used in order to better comprehend applicability of decision analysis concepts and
techniques in real world problems. Extended class room discussions on case study analyses will be instrumental in
understanding key issues pertaining to application, managerial concerns, and assumptions around the technique while
focusing on the real world problem, (2) a number of lab sessions have been included in order to develop practical skills
of configuring and using spreadsheets for decision analysis.
COURSE PREREQUISITE(S)

Participants should possess basic knowledge of Probability / Statistics and calculus.


Students should have taken DISC-203 or an equivalent course.

COURSE LEARNING OBJECTIVES


Major objectives of this course are:

(1) To expose students basic concepts, methods and techniques of decision analysis;

(2) To learn using quantitative techniques (in relation to decision analysis) for analyzing and solving real

world managerial problems;


(3) To have a hands on experience of developing spreadsheet models (using Microsoft Excel and an addon software namely Palisade Suite) for modeling and analyzing decisions;
UNDERGRADUATE PROGRAM LEARNING GOALS & OBJECTIVES
General Learning Goals & Objectives
Goal 1 Effective Written and Oral Communication
Objective: Students will demonstrate effective writing and oral communication skills
Goal 2 Ethical Understanding and Reasoning
Objective: Students will demonstrate that they are able to identify and address ethical issues in an
organizational context.
Goal 3 Analytical Thinking and Problem Solving Skills
Objective: Students will demonstrate that they are able to identify key problems and generate viable
solutions.
Goal 4 Application of Information Technology
Objective: Students will demonstrate that they are able to use current technologies in business and
management context.
Goal 5 Teamwork in Diverse and Multicultural Environments
Objective: Students will demonstrate that they are able to work effectively in diverse environments.
Goal 6 Understanding Organizational Ecosystems
Objective: Students will demonstrate that they have an understanding of Economic, Political,
Regulatory, Legal, Technological, and Social environment of organizations.
Major Specific Learning Goals & Objectives
Goal 7 (a) Program Specific Knowledge and Understanding

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Objective: Students will demonstrate knowledge of key business disciplines and how they interact
including application to real world situations.
Goal 7 (b) Understanding the science behind the decision-making process (for MGS Majors)
Objective: Students will demonstrate ability to analyze a business problem, design and apply
appropriate decision-support tools, interpret results and make meaningful recommendations to support the
decision-maker

Indicate below how the course learning objectives specifically relate to any program learning goals and objectives.
Program Learning Goals and
Objectives
Goal 1 Effective Written and Oral
Communication
Goal 2 Ethical Understanding and
Reasoning
Goal 3 Analytical Thinking and
Problem Solving Skills

Course Learning Objectives

Course Assessment Item


Written Case Analyses.
Group Project (Presentation).

To learn using quantitative techniques Written Case Analyses.


(in relation to decision analysis) for Midterm Exam
analyzing and solving real world Final Exam
managerial problems (Obj-2);
To have a hands on experience of
developing spreadsheet models (using
Microsoft Excel and an add-on
software namely Palisade Suite) for
modeling and analyzing decisions
(Obj-3);

Goal 4 Application of Information


Technology
Goal 5 Teamwork in Diverse and
Multicultural Environments
Goal 6 Understanding
Organizational Ecosystems
Goal 7 (a) Program Specific
Knowledge and Understanding

Written Case Analyses.


Group Project.

To expose students basic concepts, Class Participation.


methods and techniques of decision Group Project.
analysis (Obj-1);;
To learn using quantitative techniques
(in relation to decision analysis) for
analyzing and solving real world
managerial problems (Obj-2);

Goal 7 (b) Understanding the


science behind the decision-making
process
LEARNING OUTCOMES

To have a hands on experience of


developing spreadsheet models (using
Microsoft Excel and an add-on
software namely Palisade Suite) for
modeling and analyzing decisions
(Obj-3);
To understand basic concepts, methods Quizzes
and techniques of decision analysis.
Midterm Exam
Final Exam

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Decision Analysis Process, and accompanying concepts, methods and techniques.


Palisade Suite for conducting quantitative analyses.
Capability to take managerial decisions.

GRADING BREAKUP AND POLICY


Written Cases Analyses / Assignment(s): 20%
Home Work:
Quiz(s): 10%
Class Participation: 15%
Attendance:
Midterm Examination: 10%
Project: 15%
Final Examination: 30%
The instructor has the right of 5% re-assigning of the criteria.
Class Participation Policy
Class participation grading will be carried out as per the following rules:
a) - 0.5 for being absent from the class.
b) 0.5 for attending the class.
c) 1.0 for little participation in the class discussion (granted for asking questions relevant to a discussion, describing
case facts, giving an opinion or idea in relation to the discussion).
d) 1.5 for good participation in the class discussion (granted for giving a valid contradictory viewpoint or
comprehensive argument or rationale behind a concept).
e) 2.0 for very good participation in the class discussion (granted for hitting multiple ds as mentioned above)
f) 2.5 for excellent participation in the class discussion (granted for bringing to the class and supporting with solid
argument some concepts which even instructor does not know)
Group Project
Students will engage in a group project. The group size will be decided based on course enrollment. Students will
identify a decision situation in an organization and apply course concepts thus formulating and analyzing the problem.
Following this they will synthesize and suggest an appropriate solution to the problem. They will share their solution
with the case study organization, and understand from company personnel the likely problems in implementing their
solutions. The feedback obtained from the company personnel will be incorporated in the final project report. A detailed
description on group project will be provided once the course starts.
EXAMINATION DETAIL

Midterm
Exam

Yes/No: Yes
Combine Separate: Combine
Duration: 3 Hours in the Lab
Preferred Date:
Exam Specifications: Closed Books / Open Notes

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Final Exam

Yes/No: Yes
Combine Separate: Combine
Duration: 4 Hours in the Lab
Exam Specifications: Closed Books / Open Notes

TEXTBOOK(S)/SUPPLEMENTARY READINGS
Following books are recommended for this course however, students are strongly encouraged to consult any other
resources such as: books, journals, magazines, sharing personal experiences to enhance their learning.
[AWZ]: Albright, S.C., Winston, W.L., and Zappe, C., 2006, Data Analysis & Decision Making With Microsoft Excel,
3e, Thomson, South-Western, ISBN: 0-324-40083-7.
[CLEMEN]: Clemen, R. T., 2001, Making Hard Decisions: An Introduction to Decision Analysis with Decision Tools,
Duxbury Press, Thomson Learning, ISBN: 0-534-36597-3.
[PB]: Powell, S.G., and Baker, K.R., 2009, Management Science The Art of Modeling with Spreadsheets, John Wiley
& Sons Inc., ISBN-13: 978-0-470-39376-5.
[ASW] Anderson, Sweeney & Williams, Statistics for Business and Economics.

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DETAILED COURSE OUTLINE


S.

No.

Session
Type

Topics & Texts

Session Objectives
INTRODUCTION

1.

Class

Topic: Introduction
Read: PB-Chapter-2: Modeling in a Problem Solving Framework
(Sections 2.1, 2.2, 2.3, 2.4)

Decision analysis and


problem solving.

2.

Lab

Topic: Using Spreadsheet for Probability & Probability Distributions


Read & Practice Solved Examples:
(1) AWZ-Chapter-5: Probability and Probability Distribution (Sections
5.1, 5.2, 5.3, 5.4, 5.5, 5.6)
(2) AWZ-Chapter-6: Normal, Binomial, Poisson, and Exponential
Distributions (Sections 6.1, 6.2, 6.3, 6.7)

Revision of probability
distributions.

MODELING DECISIONS
3.

Class

Topic: Decision Analysis


Case: Athens Glass Works
Read: CLEMEN-Chapter-3: Structuring Decisions pp43-65

Making Influence
Diagrams.

4.

Class

Topic: Decision Trees


Case: Freemark Abbey
Read: (1) Decision Trees for Decision Making
(2) CLEMEN-Chapter-3: Structuring Decisions pp69-83

Making and analyzing


decision trees.

5.

Class

Topic: Sensitivity Analysis


Case: Dhahran Roads (A)
Read: (1) CLEMEN-Chapter-5: Sensitivity Analysis pp174-192
(2) Cash Flow and Time Value of Money

Role of sensitivity
analysis in decision
modeling, analyzing
and making.

6.

Lab

Topic: Using Spreadsheet for Decision Trees


Read & Solve Problems:
AWZ-Chapter-7: Decision Making under Uncertainty,
Section-7.3, (Solve Problems 36 and 37 given at the end of the chapter)

Making decision trees


using spreadsheet.

MODELING UNCERTAINTY
7.

Class

Topic: Decision Making under Uncertainty


Case: Georges T-Shirts
Read: CLEMEN-Chapter-4: Making Choices pp111-145

Making decisions in
probabilistic situations.

8.

Class

Topic: Value of Information


Case: Integrated Siting Systems, Inc.
Read: CLEMEN-Chapter-12: Value of Information, pp496-509

The influence of
availability of
information on
decision.

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9.

Lab

Topic: Spreadsheet Modeling for Decision Making under Uncertainty


Read & Practice Solved Examples:
AWZ-Chapter-7: Decision Making under
Uncertainty, Section-7.4, 7.5 (Examples 7.2, 7.3, 7.4)

Practicing probabilistic
decisions using
spreadsheets.

10.

Lab

Topic: Simulation Modeling with Spreadsheets


Read & Practice Solved Examples:
AWZ-Chapter-16: Introduction to Simulation
Modeling, Sections 16.4, 16.5, and 16.6 along with accompanying
examples.

Understanding RISK as
a package to model
decisions using
simulations.

11.

Lab

Topic: Simulation Modeling with Spreadsheets


Read & Practice Solved Examples:
AWZ-Chapter-17: Simulation Models, Sections 17.2, 17.3, 17.5 and
accompanying Examples)

Understanding RISK as
a package to model
decisions using
simulations.

12.

Class

Topic: Monte Carlo Simulations


Case: (1) Calambra Olive Oil (A)
(2) Calambra Olive Oil (B)
Read: CLEMEN-Chapter-11: Monte Carlo Simulation pp 459-487

Understanding Monte
Carlo simulation
method.

13.

Class

Topic: Risk Analysis in Monte Carlo Simulations


Case: Sprigg Lane (A)
Read: Probability Distributions and Simulation

Practicing Monte Carlo


simulation method.

MIDTERM EXAM
MODELING PREFERENCES
14.

Class

Topic: Risk Attitude


Case: Risk Preference Utility Caselets
Read: CLEMEN-Chapter-13: Risk Attitude, pp 527-555

Understanding the
influence of manager
risk attitude on
decisions.

15.

Class

Topic: Risk Attitude


Case: Risk Analysis for Merck & Company: Product KL-798
Read: CLEMEN-Chapter-13: Risk Attitude, pp 527-555

Understanding the
influence of manager
risk attitude on
decisions.

16.

Lab

Topic: Incorporating Risk Attitude


Read & Practice Solved Examples:
(1) CLEMEN-Chapter-13: Read section named Modeling Preferences
Using PrecisionTree on page-546 and solve Problem therein.
(2) AWZ-Chapter-7: Decision Making under Uncertainty, Section-7.6,
Example 7.5.

Practicing risk attitude


using spreadsheet.

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(3) AWZ-Chapter-7: Decision Making under Uncertainty, and solve


Problems: 77, 79, 80
17.

Class

Topic: Structuring Multi-Objective Decisions


Case: William Taylor and Associates (A)
Read: CLEMEN-Chapter-15: Conflicting Objectives I: Fundamental
Objectives and the Additive Utility Function pp599-621

Understanding multiobjective decisions and


structuring them.

18.

Class

Topic: Additive Utility Function


Case: Sleepmore Mattress Manufacturing; Plant Consolidation
Read: CLEMEN-Chapter-15: Conflicting Objectives I: Fundamental
Objectives and the Additive Utility Function pp599-621

Additive utility
function as a method of
analyzing multiobjective decisions.

19.

Class

Topic: Multi-attribute Utility Models


Case: Whirlpool Research and Engineering (A) & (B)
Read: CLEMEN-Chapter-16: Conflicting Objectives II: Multi-attribute
Utility Models with Interactions pp644-659

Multiplicative utility
function as a method of
analyzing multiobjective decisions.

OPTIMIZATION MODELS
20.

Class

Topic: Optimization Value


Case: Salmones Puyuhuapi; Production Planning
Read: Introduction to Optimization Models (Section before Integer
Programming)

Decision analysis for


optimization or goal
programming.

21.

Class

Topic: Mixed Linear/Integer Programming


Case: JCG Global Air Services
Read: Intro. to Optimization Models (Section on Linear & Integer
Programming)

Decision analysis for


optimization of integer
functions.

22.

Class

Topic: Using Linear Programming; Results and Sensitivity


Case: Chandpur Enterprises Limited: The Steel Division
Read: Intro. to Optimization Models (Section on Sensitivity Analysis and
Beyond)

Sensitivity analysis in
optimization problems.

STRATEGIC INTERACTIVE DECISIONS


23.

Class

Topic: Matrix Game Analysis


Case: Lesser Antilles Lines: The Island of San Huberto (A)
Read: (1) Structuring competitive analysis
(2) Competitor Analysis

Modeling and
analyzing game
theoretic situations
using decision models.

24.

Class

Topic: Matrix Game Analysis


Case: Germania Fluggesellschaft MBH (A) & (B)
Read: (1) Structuring competitive analysis
(2) Competitor Analysis

Modeling and
analyzing game
theoretic situations
using decision models.

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25.

Class

Topic: Negotiation Analysis


Case: Kelly Solar
Read: None

Modeling and
analyzing negotiations
using decision models.

26.

Class

Topic: Bidding and Auctions


Case: Bidding For Hertz; Leveraged Buyout
Read: A note on sealed bid auctions

Modeling and
analyzing bidding and
auction problems using
decision models.

SUMMARY
27.

Class

Topic: A Comprehensive Case


Case: Airbus and Boeing: Super Jumbo Decisions
Read: None

Revision.

28.

Class

Project Presentations

Project presentations.

FINAL EXAM