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Spreadsheet Modeling and Decision Analysis



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Spreadsheet Modeling Decision Analysis A Practical Introduction to Management Science 5th edition Cliff T Ragsdale Chapter 15 Decision Analysis Introduction to Decision Analysis Models help managers gain insight and understanding but they can t make decisions Decision making often remains a difficult task due to Uncertainty regarding the future Conflicting values or objectives Consider the following example Deciding Between Job Offers Company A In a new industry that could boom or bust Low starting salary but could increase rapidly Located near friends family and favorite sports team Company B Established firm with financial strength and commitment to employees Higher starting salary but slower advancement opportunity Distant location offering few cultural or sporting activities Which job would you take Good Decisions vs Good Outcomes A structured approach to decision making can help us make good decisions but can t guarantee good outcomes Good decisions sometimes result in bad outcomes Characteristics of Decision Problems Alternatives different courses of action intended to solve a problem Work for company A Work for company B Reject both offers and keep looking Criteria factors that are important to the decision maker and influenced by the alternatives Salary Career potential Location States of Nature future events not under the decision makers control Company A grows Company A goes bust etc An Example Magnolia Inns Hartsfield International Airport in Atlanta Georgia is one of the busiest airports in the world It has expanded many times to handle increasing air traffic Commercial development around the airport prevents it from building more runways to handle future air traffic Plans are being made to build another airport outside the city limits Two possible locations for the new airport have been identified but a final decision will not be made for a year The Magnolia Inns hotel chain intends to build a new facility near the new airport once its site is



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