Assignment 2, Decision Making and Choice Behavior Juho Laurila 717050, Waltteri Saari xxxxxx, Filip Kaukiainen xxxxxx In this report, we will analyze and recommend the best alternative for transportation among four alternatives for Juho who is looking for a means of transportation. Our goal is to use concepts from Multi-Attribute Value Theory (MAVT) and value-focused thinking to evaluate the value of each option and provide a strategic decision analysis. Through a systematic process, we will identify objectives, develop attributes, collect performance data, elicit value scores and attribute weights using the SWING method, and analyze the overall value of the options. Finally, we will draw conclusions and recommendations, taking into account behavioral issues, assumptions, and limitations. Fundamental Objectives Our decision problem is constructed on the choice of the best mode of transportation to meet one's mobility needs. The decision-maker must weigh their preferences, needs, and circumstances of selected attributes against the available transportation options to select the one that best suits them. The given decision problem in transportation involves assessing and choosing the best mode of transportation based on the cost, availability, flexibility, emissions, reliability, and safety. To make an informed choice that satisfies their unique needs and priorities, the decision-maker must carefully consider these objectives. 1. Cost: Assessing the affordability and financial implications of each alternative. 2. Availability: Evaluating the ease of access and availability of the transportation option. 3. Flexibility: Examining the level of flexibility and freedom offered by the means of transportation. 4. Emissions: Considering the environmental impact and emissions associated with the option. 5. Reliability: Assessing the dependability and consistency of the transportation mode. 6. Safety: Evaluating the level of safety and security provided by the alternative. Mutually Exclusive Decision Alternatives As written before, our decision problem is constructed around choosing the most suitable means of transportation for Juho’s family amongst the most common and viable alternatives. These four options include: Buying a new car, buying an old car, leasing a new car, or using public transportation. The following parts will discuss the advantages and disadvantages of the given four alternatives. In this case, the decision maker must consider these alternatives to make an informed decision that is aligned with the personal needs of the person. We will consider four mutually exclusive decision alternatives: 1. New car: Purchasing a brand-new car from a dealership. 2. Used car: Buying a pre-owned car from a private seller or dealership. 3. Leased car: Opting for a car lease agreement with fixed monthly payments. 4. Public transportation: Utilizing existing public transportation systems, such as buses or trains. Assignment 2, Decision Making and Choice Behavior Juho Laurila 717050, Waltteri Saari xxxxxx, Filip Kaukiainen xxxxxx Due to time constraints and to make the alternatives easily comparable we will stay to one car model: Volvo XC40 Attributes for Objective Measurement To evaluate the achievement of each decision alternative on the fundamental objectives, we have defined the following attributes: 1. Cost: The average lump sum cost of each alternative at any given moment. 2. Availability: The accessibility and convenience of the means of transportation. 3. Flexibility: The degree of freedom and adaptability offered by the option. 4. Emissions: The environmental impact and carbon emissions associated with the alternative. 5. Reliability: The consistency and dependability of the transportation mode. 6. Safety: The level of safety and security provided by the option. Performance Data We have collected performance data for each alternative, which is presented in the table below: Decision Emissions Cost Availability Flexibility Reliability Safety Alternative gCO2/KM New car $56,000 Excellent Excellent 0 Excellent Excellent Used car $26,000 Excellent Excellent 0 Good Good Leased car $46,000 Excellent Excellent 0 Excellent Excellent Public transportation $8,000 Good Fair 21 Poor Fair Source for emmissions: https://www.sitra.fi/en/cases/public-transport-in-urban-areas-helsinki/ Eliciting Attribute Weights By eliciting value scores for each attribute and alternative, we aim to capture the decision maker's preferences and trade-offs. Because the bisection method cannot be used when the measurement scale is discrete, we asked Juho to apply a value to the following discrete measurement; Poor, Fair, Good, and Excellent. He chose the following value to represent to each discrete measurement. Poor 0,1 Fair Good Excellent 0,2 0,8 1 After establishing the discrete measurements, we used the bisection method to elicit attribute specific value function for the cost of the transportation mean. Assignment 2, Decision Making and Choice Behavior Juho Laurila 717050, Waltteri Saari xxxxxx, Filip Kaukiainen xxxxxx Decision Alternative A (New car) B (Used car) C (Leased car) D (Public transportation) Cost 56000 26000 46000 8000 Value Score 0 0.4 0.2 1 Secondly, since we are limited to time constraints, we have chosen the majority of the attributes to be discrete attributes. We must convert the performance data to a scorecard matrix by assessing attribute-specific discrete value functions. Decision Alternative Cost New car Used car Leased car Public transportation Availability Flexibility 0 0,4 0,2 1 1 1 1 0,8 1 1 1 0,2 Emissions Reliability Safety gCO2/KM 1 1 1 1 0,8 0,8 1 1 1 0,2 0,1 0,2 When it comes to decision-making, utilizing a method like SWING (Scaling, Weighting, and Rating) can bring about various advantages. It promotes objectivity by reducing bias and maintaining a consistent and rational approach. Decision-makers can easily grasp the weight assignment process through its transparent visual representation, enhancing understanding and fostering a more transparent decision-making process. Attribute swung from worst to best Rank Wj wj Emissions gCO2/KM 6 Availability 1 98 0,216814 Flexibility 5 70 0,154867 Cost 2 90 0,199115 Reliability 3 95 0,210177 Safety 4 99 0,219027 Total 452 1 0 Overall Value Analysis By combining the value scores and attribute weights, we have calculated the overall value for each alternative. The results of the decision analysis are as follows: Assignment 2, Decision Making and Choice Behavior Juho Laurila 717050, Waltteri Saari xxxxxx, Filip Kaukiainen xxxxxx Decision Alternative Cost Availability Flexibility Emissions Reliability Safety MAV gCO2/KM New car 0 1 1 1 1 1 Used car 0,4 1 1 1 0,8 0,8 Leased car 0,2 1 1 1 1 1 1 0,8 0,2 0,2 0,1 0,2 0,1991 0,2168 0,1549 0,0000 0,2102 0,2190 Public transportation Weights 0,8009 0,7947 0,8407 0,4684 Conclusion and Recommendations Based on the strategic decision analysis conducted, we recommend choosing the leased car as the most suitable means of transportation. It demonstrates the highest overall value among the alternatives, achieving a balanced performance across the fundamental objectives. The leased car offers relatively high availability, flexibility, reliability, and safety, while also exhibiting low emissions (as did all car alternatives since we compared it only with one model). Although it comes with a higher cost compared to public transportation and a used car, the additional benefits might justify the investment. However, it is important to consider individual circumstances, preferences, and contextual factors when making the final decision. Factors such as personal financial situation, commute distance, and environmental consciousness may influence the choice of transportation mode. Additionally, it is crucial to monitor ongoing advancements in electric vehicles and sustainable public transportation to ensure long-term viability and sustainability. Behavioral Issues, Assumptions, and Limitations During the analysis, we should acknowledge certain behavioral issues, assumptions, and limitations. Behavioral issues include the potential influence of biases such as anchoring bias, overconfidence bias, and confirmation bias on the decision maker's judgments. Assumptions include rational decision-making, independence of attributes, and consistency in value judgments. Limitations encompass subjectivity in value elicitation, limited attribute scope, lack of external validation, contextual factors, limited time horizon, and the absence of sensitivity analysis. Accurately ranking and rating the attributes posed a challenge due to their inherent subjectivity and reliance on multiple assumptions that may not align with the reader's perspective. Moreover, in real-life decision-making, numerous other criteria come into play, which may not have been considered in the given example, such as the car salesman's demeanor or prevailing interest rates for car loans. Furthermore, biases heavily influence the decision process when selecting a specific used car for analysis. The biases may impact the choice of a car with particular specifications and Assignment 2, Decision Making and Choice Behavior Juho Laurila 717050, Waltteri Saari xxxxxx, Filip Kaukiainen xxxxxx introduce subjective elements to the analysis. Additionally, the price of the used car may be influenced by the pricing strategies employed by car dealerships. Notably, in this case, there was a lack of individual price calculation efforts. It is important to acknowledge that decision-making is complex and influenced by various factors beyond the scope of this analysis. Real-world considerations and biases can significantly impact the decision-making process, necessitating a nuanced approach and careful evaluation of all relevant criteria. Moreover, there are several other biases that should be considered in the decision analysis: 1. Omission Bias: Even if the problem representation is considered "correct," there is a risk of overlooking important objectives and alternatives due to omission bias. This bias occurs when decision makers focus on the options presented to them and fail to consider other potentially relevant choices. 2. Scaling Biases: Two scaling biases that can impact the decision analysis are range equalizing bias and equal frequency bias. Range equalizing bias refers to the tendency to use most of the response range regardless of the range of stimuli. In other words, decision makers may inadvertently assign extreme values to attributes even when the differences between the options are not significant. Equal frequency bias, on the other hand, refers to the tendency to use all parts of the response scale equally, which may lead to overemphasizing less important attributes or underemphasizing more important ones. 3. Desirability Bias: Desirability bias occurs when decision makers distort the value functions to favor their preferred alternative. This bias can lead to subjective assessments that overstate the benefits of the chosen option or downplay its drawbacks, ultimately influencing the overall value analysis. It is important to be aware of these biases and their potential influence on the decisionmaking process. By acknowledging and mitigating these biases, decision makers can strive for a more objective and accurate evaluation of the alternatives, leading to more informed and reliable recommendations. In conclusion, this decision analysis provides valuable insights into selecting the most suitable means of transportation. While the recommended option is the leased car based on the analysis, decision makers should consider their unique circumstances, preferences, and evolving transportation trends to make an informed choice.
