Quantitative decision Quantitative decision makingmaking

IntroductionIntroductionDecision making is needed whenever an individual or an Decision making is needed whenever an individual or an

organization is faced with a situation of selecting an organization is faced with a situation of selecting an optimal course of action among several available optimal course of action among several available

alternativesalternativesA business firm may have to decide the type of technique A business firm may have to decide the type of technique

to be used in production, which product firm should to be used in production, which product firm should produce, what is the most appropriate method of produce, what is the most appropriate method of

advertising its product etc.advertising its product etc.Decision making is a process of choosing an optimal Decision making is a process of choosing an optimal

course of action out of several alternative courses for the course of action out of several alternative courses for the purpose of achieving a goals. Statistical decision theory purpose of achieving a goals. Statistical decision theory consists of a large number of quantitative techniques consists of a large number of quantitative techniques

which helps in analyzing a decision situation and enable which helps in analyzing a decision situation and enable us to assure at a conclusion which is the best under given us to assure at a conclusion which is the best under given

circumstances of the casecircumstances of the case

Elements of a decision Elements of a decision problem problem

ActsActs States of natureStates of nature Pay off tablePay off table

Decision making environmentsDecision making environmentsdecision making under conditions of decision making under conditions of

certaintycertainty

Decision making under conditions of Decision making under conditions of uncertaintyuncertainty

Decision making under conditions of riskDecision making under conditions of risk

Decision criteriaDecision criteria

Decision making under Decision making under uncertaintyuncertaintyMaximinMaximinMaximaxMaximaxMinimax regret criterionMinimax regret criterionLaplace criterionLaplace criterion

Decision making under risksDecision making under risksExpected monetary valueExpected monetary valueExpected opportunity lossExpected opportunity loss

OVER VIEWOVER VIEW

CorrelationCorrelation

RegressionRegression

Chi squareChi square

F test and analysis of varianceF test and analysis of variance