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Lahore University of Management Sciences DISC 321 - Decision Analysis
Lahore University of Management Sciences DISC 321 - Decision Analysis
Lahore University of Management Sciences DISC 321 - Decision Analysis
Course Basics
Credit Hours 4
Lecture(s) Nbr of Lec(s) Per Week 2 Duration 1 hr 50 min
Recitation/Lab (per week) Nbr of Lec(s) Per Week Duration
Tutorial (per week) Nbr of Lec(s) Per Week Duration
Course Distribution
Core Core
Elective
Open for Student Category
Close for Student Category
COURSE DESCRIPTION
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, and multi-
objective decisions. A real-world project and written case analyses provide avenues for practical learning.
Major objectives of this course are:
(1) To understand basic concepts, methods and techniques of decision analysis;
(2) To develop capability to use quantitative techniques (in relation to decision analysis) for analyzing and solving real life managerial problems;
(3) To have 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 organziation’s 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 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.
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
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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 that 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
classroom 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.
•
LEARNING OUTCOMES
• Decision Analysis Process, and accompanying concepts, methods and techniques.
• Palisade Suite for conducting quantitative analyses.
• Capability to take managerial decisions.
Assignment(s): 15%
Home Work: -
Quiz(s): 15%
Class Participation: 10%
Attendance: 5%
Midterm Examination: 20%
Project: 10%
Final Examination: 25%
Policy:
Assignments: Assignments will be (timed) in groups. Instructor will make the groups by himself. There will be 5 group and/or individual
assignments (N-1 policy).
Quizzes: Major quizzes will be announced individual timed assignments. There will be 5 major quizzes (N-1 policy).
Class participation: Several minor quizzes will be the part of CP. These will be unannounced and swift individual timed assignments.
Attendance: Attendance will be mandatory for all the on-campus / online sessions. Allowed absence = 3, further absences will be penalized by
10% each of the attendance weightage.
Project: Project will be in the group. Details will be shared later.
Midterm Exam: Midterm Exam will be an individual timed assignment.
Final Exam: Final Exam will be an individual timed assignment.
Note: Only LMS submissions will be accepted from online section and by-hand submissions from on-campus section. Late submissions (in any
case) will not be entertained.
EXAMINATION DETAIL
Yes/No: Yes
Combine Separate: Combine
Midterm
Duration: 2 hrs
Exam
Preferred Date: TBA
Exam Specifications: Open Book / Open Notes Timed Assignment
Yes/No: Yes
Combine Separate: Combine
Final Exam
Duration: 3 hrs
Exam Specifications: Open Book / Open Notes Timed Assignment
COURSE OVERVIEW
Week/ Lecture/ Recommended Objectives/
Topics
Module Readings Application
1. Introduction Readings: Decision analysis and problem-solving.
PB-Chapter-2: Modeling in a Problem Solving
2. Framework (Sections – 2.1, 2.2, 2.3, 2.4)
“Learning by the Case Method”, by Hammond, J.S.
(HBS # 9-376-241).
3. Objectives Hierarchy, Reading: CLEMEN-Chapter Structuring Decisions Developing and analyzing Influence Diagrams.
Influence Diagrams, pp43-65
4. and Payoff Table Case: Athens Glass Works Developing and analyzing Influence Diagrams.
5. Decision Trees Readings: Developing and analyzing decision trees.
CLEMEN-Chapter-3: Structuring Decisions pp69-83
6. Decision Trees Case: Freemark Abbey Developing and analyzing decision trees.
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7. Decision-Making Reading: CLEMEN-Chapter-4: Making Choices Making decisions in probabilistic situations.
under Uncertainty pp111-145
8. Sensitivity Analysis Reading: CLEMEN-Chapter-5: Sensitivity Analysis The role of sensitivity analysis in decision
pp174-192 modeling and analyzing.
9. Sensitivity Analysis Case: Dhahran Roads (A) The role of sensitivity analysis in decision
Reading: Cash Flow and Time Value of Money modeling, analyzing and making.
(SKIM)
10. Using Spreadsheet for Reading: AWZ-Chapter-7: Decision Making under Making decision trees using a spreadsheet.
Decision Trees Uncertainty, Section-7.2, 7.3.
22. Incorporating Risk Reading: AWZ-Chapter-7: Decision Making under Practicing risk attitude using a spreadsheet.
Attitude Uncertainty, Section-7.6.
23. Risk Attitude Caselets: Risk Preference Utility Caselets Practicing risk attitude.
24. Risk Attitude Case: Risk Analysis for Merck & Company: Product Understanding the influence of manager risk
KL-798 attitude on decisions.
25. Structuring Multi- Reading: CLEMEN-Chapter-15: Conflicting Understanding multi-objective decisions and
Objective Decisions Objectives I: Fundamental Objectives and the structuring them.
Additive Utility Function pp599-621.
26. Additive Utility Case: Sleepmore Mattress Manufacturing; Plant Additive utility function as a method of
Function Consolidation. analyzing multi-objective decisions.
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.