BUS 650 — Decision Modeling
Spring 2009
Prof. Patrick S. Noonan
Rm. 417, Goizueta Business School
GBS ofc.:
404.727.0549
mobile:
678.358.5961
Drop-in office hours for Spring '09: tba
Other office appointments: contact via Patrick_Noonan@bus.emory.edu
DIA Area - Admin. Asst.: Jalisa Norton, Room 423, 404.727.8698
Teaching Assistants (TAs): We will be assisted by a team of MBAs who performed very well in the course
last year – and also showed great interest & ability in helping others learn the material:
Tom Enright /Shelby Senzer / Andy Strong
Catalog Description
Prerequisite: BUS 550 or equivalent. Advanced topics and tools for decision analysis of problems with
―real-world‖ complications. First of all, complex problems may overwhelm the simple decision tree
methodology; here we consider influence diagrams (an alternative representation of decision problems) and
optimization approaches that permit examination of larger scale problems. Further, we cannot always adopt
the simplifying ―billionaire‘s perspective‖; this course examines risk aversion, multiple decision criteria,
and value tradeoffs. Finally, complex problems may be interactive and dynamic; the course explores the
behavior of dynamic systems, including discussions of complexity and chaos.
Essentially this means learning how to extend decision analysis concepts and techniques to include attitudes
about risk, multiple conflicting objectives, complex uncertainties (requiring Monte Carlo simulation),
complex alternatives (requiring linear programming and other optimization techniques), and dynamic
interactions. In addition, we must learn the subtleties of applying quantitative modeling techniques to
managerial and strategic settings in organizations.
Course Meetings
Section 1
Section 2
Tues./Thurs.
Thurs.
2:30-3:45pm
6:30-9:30pm
Rm. GBS 231
Rm. GBS 301
*** Please note that there is a brief reading & prep assignment for our first meeting. ***
Optional ―Tool Time‖ software sessions: tba
Optional guest speakers: tba
Optional informal lunch/dinner/coffee sessions: tba
Office Hours
I will hold drop-in office hours most weeks, although I haven‘t yet worked out a regular schedule
for this semester. All these days and times will be posted in our course conference on First Class. Other
meetings will be available by appointment.
BUS 650 – Preliminary Syllabus p. 1
What is this Course About???
This is another course about ―reasoning about decisions.‖
From your introductory course in decision analysis, you should be familiar with this point of view:
―Decisions are like a ‗fundamental particle‘ of management. At the core of the very complex roles we play
in strategy, marketing, operations, finance, and other management functions, there are identifiable decisions
we must make.‖
This perspective introduced you to the notion that there are decisions lurking in everything we do
as managers, citizens, and humans — and that there is valuable insight to be gained by looking at the
decisions in an informed and disciplined way.
However, we now need to move beyond the simplified settings we explored in the Core. In this
course (and its companion stand-alone elective, BUS 651 Strategic Decision Analysis) we re-introduce most
of the various complexities that make the real world so...well, maddeningly complex.
Both these courses are, in essence, extensions of the decision analysis component of the 550 course
— but not the data analysis/statistics component. They are not ―stats‖ courses, nor are they courses just for
―quant jocks.‖ (Recent participants have included consultants, finance and marketing concentrators, general
managers, engineers, lawyers, nurses, entrepreneurs and actors.)
These courses are targeted broadly at people who want more exposure to models of decisionmaking that are useful in management and in explaining many of the complex phenomena we observe in
business, policy, and human affairs.
The objective is to give each student better conceptual frameworks, more powerful analytical tools,
and pathways for further exploration of those ideas that prove most important in their post-MBA careers.
Specifically, the topics and issues we will explore together in this course include:
How should we make individual decisions when our simple “decision tree” assumptions do
not apply?
• aversion to risk
• making tradeoffs among multiple, conflicting objectives (both monetary and nonmonetary)
• attitudes about personal risk (e.g. health hazards, ―threats to life & limb‖)
How should we make decisions when we’re embedded in large or complex systems
(industries, markets, neighborhoods, society)?
• influence diagram representations of decision problems
• simulation, optimization, and search techniques
• behavior of dynamic systems (including chaos)
• complexity theory and applications
How can I incorporate analytical modeling into managerial thought, judgment & action?
BUS 650 – Preliminary Syllabus p. 2
Course Materials
The required materials for the course are:




Clemen & Reilly, Making Hard Decisions – with DecisionTools (a hardback textbook)1;
the 2008-2009 edition of the DecisionTools suite [available from the University
book store. Do NOT install the version that is bundled with the textbook!]
a case packet [available from Study.Net]
additional readings [those listed in the syllabus with an ―ER‖ are available using the
Goizueta library‘s e-Reserve system; others will be handed out or posted]
We will explicitly discuss in class most of the reading assignments. Others may not be discussed
directly but will help you as you prepare the assignments. Still others may not relate directly at all to the
week‘s assignments, but rather form an important part of the increasingly sophisticated understanding of
decision making that this course is attempting to nurture.
The assignments will distinguish between required and merely helpful readings. At quiz times, you
are responsible for all required readings, regardless of whether they have been discussed in class.
Course Format and Grading
Summary:
Percentage
30%
40%
10%
20%
Component
Routine work & participation
2 Take-home quizzes
Application portfolio
Final project
We will approach these topics using a mixed pedagogy consisting of conceptual & real-world
cases, lectures, news & trade articles, conceptual readings, research articles, textbook chapters, experiential
exercises, computer simulations and other information technology-based demonstrations. (Expect to do a
lot of work for this course, including a lot of reading and wrestling with software in new ways.)
The primary requirement is for each student to prepare the readings, cases and exercises and to
come to every class ready to contribute to our discussions. (On a few occasions, your advance preparation
will lead to something that must be turned in to me.) In addition, there will be two short quizzes (individual
work) and a final project (individual or group work).
Routine Work & Participation [30%]
The nature of our meetings will vary from week to week, although each week is likely to contain
one case discussion session, and one session covering readings and exercises. In every session, the emphasis
will be on interaction, even in some of the more lecture- or demonstration-oriented sessions. To maximize
our collective learning, everyone must engage and participate to the best of their abilities, which will require
thoroughly preparing all assigned readings, cases, experiential exercises (experiments, negotiations, games,
etc.) and assignment problems in advance of class.
When our focus is a case, you are expected to have thoroughly prepared the assignment, including:
reading the cases and any accompanying notes, performing the necessary and appropriate analyses (whether
they‘re spelled out for you or not – often the point is for you to figure out what you‘re supposed to do to
crack the key issues of the case), and preparing answers to the case questions. Discussing the assignments
in groups is strongly encouraged, although once you‘re in the classroom, generally you‘re ―on your own.‖
1 There are several printings of this book available, new and used, that are nearly identical and will work
perfectly for this course (2000, 2001, 2003). The only version that will not work is the original 1997 book
by Clemen alone (no Reilly yet!). Don‘t worry if a used copy does not still contain the DecisionTools Suite
software CD-ROM – you won‘t use that CD-ROM anyway, only the more recent and powerful version
that‘s available through the University Bookstore.
BUS 650 – Preliminary Syllabus p. 3
Class participation will be graded each meeting. The impact of your contributions (be they helpful
insights, articulate skepticisms, or thoughtful questions) to the quality of our discussions and collective
learning over the semester will count for 30% of your course grade. The occasional assignment that must be
turned-in and your participation in our First Class discussion conference also count in this portion of your
course grade. We will review standards and expectations for class participation at the one of our first course
meetings.
Quizzes [40%]
You will have two short take-home Quizzes, which will cover the various types of analytical
techniques we will cover. Each will be worth 20% of your course grade.
Application Portfolio [10%]
Identifying & organizing specific real-world examples of the course issues & tools – in the news,
on web sites, in your organization – will be an important part of your learning to apply these issues & tools.
Part of your graded work will involve keeping a notebook ―portfolio‖ that links the major topics of the
course to the real world. At our first course meeting, I will provide more details about how to keep a
notebook ―portfolio‖ of applications, and how this part of your course work will be evaluated. I‘ll take a
look at your developing portfolios about 1 month into the course, in order to give you (ungraded) feedback
on how your work is developing.
Final Project [20%]
A final project, which can be either an individual or group effort, will count for the remaining 20%
of your course grade.
You will have a lot of latitude in what you do: your project can consist of a research paper, a draft
of a new teaching case for possible future use in a DIA course, a case analysis of an existing case that might
be valuable for future use in this course, some games or experiential exercises for the course, etc.
You should plan on making a short summary presentation of your work to your classmates (and
me) during our designated Final Exam period, as well as creating a concise piece of written work to turn in.
We will discuss project objectives, dimensions and other expectations early in the semester.
Schedule and Assignments
Detailed assignments will be posted in our First Class conference; each posting will cover several
weeks of coursework.
Here‘s a preliminary overview of the structure of the course (details subject to change):
BUS 650 – Preliminary Syllabus p. 4
Assmnt
1
Day
Jan. 15
Evening
Jan. 15 or 16
[individual choice
– same session
will be run on
both nights]
Jan. 22
2
Jan. 20
3
4
Jan. 22
Jan .27
5
Jan. 29
6
Feb. 3
7
Feb. 5
8
Feb. 10
9
Feb. 12
10
Feb. 17
11
12
Feb. 19
Feb. 24
Feb. 19
13
Mar. 17
Mar. 19
14
Mar. 19
15
Mar. 24
16
Mar. 26
17
Mar. 31
18
Apr. 2
19
20
21
22
23
Apr. 7
Apr. 9
Apr. 14
Apr. 16
Apr. 21
Apr. 16
24
Exam
Period
Apr. 23
tba
[Apr 24May 1
tba
[Apr 24-May 1]
Jan. 29
Feb. 5
Feb. 12
Mar. 26
Apr. 2
Apr. 9
Apr. 23
Main Topics [ sequencing subject to change]
Review: Decision analysis… and its limits
Review Case: Bistro-to-Go (A)
Introductory case (in-class exercise): Hannah San Telmo
Exercises: Objectives, Attributes & Hierarchies
Computer Check – DecisionTools Suite
Resource Pricing; Computer Check – Excel Solver
Structuring Values; Value-Focused Thinking
Case: Electronic Data Systems
The Structure of Optimization Problems
The Economics of Constraints
Case: Merton Truck Company
Introducing Multiple Objectives; Scoring scales
Exercises: Multiple Objectives; Scoring
Linear Programming; Optimization Software (Excel Solver)
Case: Merton Truck Company (conclusion)
Advanced Sensitivity Analysis
Exercises: Sensitivity Analysis
Interpreting LP Output
Exercises: LP Model Building & Applications
Risk & Dominance
Alternative Representations of Decision Problems
Exercises: Risk Profiles, Dominance, and Influence Diagrams
No classes
Quiz #1 due Wed. 2/25
Review: Probability & Probability Distributions
Review Exercises: Modeling Uncertainty
Assessing Subjective Probabilities
SPRING BREAK
Risk Preferences; Modeling Risk using Utility Functions
Exercises: Risk & Utility
LP Modeling Issues; Non-linear & Integer Programs
Exercises: Integer Programming
Assessing Utility; Risk & PrecisionTree; Axioms of Rationality
Exercises: Risk Aversion & Risk Premiums
Multiple Attribute Utility Models
Exercises: Additive Utility
Advanced Simulation using @RISK
Exercises: Monte Carlo Simulation
Multiple Attribute Utility Models (conclusion)
Exercises: Applying Utility
Project Proposals due Friday, Apr. 3
Integrative Case: Buckeye Power & Light
Integrative Case: Commerce Tavern
Integrative Case: Marsh & McLennan
Risks involving Lives, Health and Safety
Dynamic Models, Chaos & Complexity
Exercises: Linear Systems, Nonlinear dynamics & chaos
The Art of Modeling; Modeling in Organizations
Final Project Presentations
[exact dates & times to be assigned to us by the Registrar]
Quiz#2 & App. Portfolio due 9am Friday, May 1
BUS 650 – Preliminary Syllabus p. 5