ISQS 5242—Decision Theory and
Management Science
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Instructor: Dr. Burns
Telephone: 742-1547
Email: jimburns@ttu.edu
Off hrs: 1:15-3:25 MW
Website: burns.ba.ttu.edu
Chapter 1
Introduction
…and sometimes
Decisions
can be made by one can find them
very
a...
challenging...
A Systematic Approach to
Decision Making was Developed
called -
MANAGEMENT
SCIENCE
Management Science
provides a scientific, systematic
approach to executive decision
making.
Management Science is also called
Operations Research
Management Science
Success Stories
• Burger King uses Linear Programming to find how
to best blend cuts of meat to minimize costs.
• American Air Lines used an Integer Linear
Programming model to determine an optimal flight
schedule.
• Sony Corp. developed an onboard navigation
system (giving directions to car drivers) using the
Shortest Route Algorithm.
Book objectives
From studying this text the student should...
• Gain familiarity with management science concept.
• Gain skills in quantitative decision making.
• Improve overall knowledge of business.
• Improve communication skills.
• Gain better familiarity with the computer.
ISQS 5242
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Prerequisites
Requirements (for completion)
Syllabus
Homework
Exams
Term Projects?
Final Grade
Prerequisites
• Completion of Tool Core Courses in MBA Program
– ISQS 5237
– Economics
ISQS 5345
Accounting
• Be able to solve systems of linear algebraic
equations
• Understand probability basics--conditional
probabilities, joint probabilities, probability trees
• DROP THE COURSE if you don’t have the
prerequisites
Text
• APPLIED MANAGEMENT SCIENCE
– Lawrence and Pasternack
– will cover chs 1-6, 8 and first third of 16 (on CDROM) and 13 in that order
• Some material from former texts coauthored by me
– will be furnished as handouts
Software
• WINQSB (for math programming, decision
trees and Markov homework)
• VENSIM (free--shareware)
• PROMODEL, MEDMODEL OR SERVICE MODEL
– you must purchase this from Promodel
Corporation
– cost is $30.00
– call 1-801-223-4600
– use a portion of your video game budget to pay
Requirements (for completion)
• Homework is worth 10% of total
– Three installments each worth .0333 or 3.33%
• Three exams (including FINAL), each worth
30%
Homework
• Will be assigned every day (two problems)
• Will be turned in the day before we do our
review
• We will do reviews just prior to each exam
Ten reasons for not turning in
homework on time
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My little sister ate it
My dog did his duty on it
We ran out of toilet paper
Our furnace broke down and we had to burn
my homework
• I had to use it to fill a hole in my shoe
Top Ten Reasons, cont’d
• I gave it to a friend and his house burned
down
• My mother threw it away by mistake
• I got hungry
• I did it, I swear, but I left it at my parents
house
• Because I didn’t feel like it—very often the
last works spoken by a registered student
Syllabus
• DECISION MAKING under Certainty
– Exam I
• DECISION MAKING under Uncertainty and
Risk
– Exam 2
• DECISION MAKING under Change and
Complexity
– Final
Exams
• Multiple choice and some discussion
problems
• Bring your own orange scantron sheets
• May use other formats as well
GRADING
• 90-100 -A
• 80-89.9999 -- B
• 70-79.9999 -- C
My Expectations
• Attend class
• Perform reading assignments before
coming to class
• Tech policy for academic honesty enforced
• Assistance for Disabled students
How to study for exams
• Read chapters before coming to class
• After each class day, go over your notes
– As soon as possible after class
– Preferably with someone else
• Make sure you understand everything
discussed
• As soon as possible do homework
Term Projects?
• Any 3-hour 5342 students?
• Any BA-7000 students?
Final Grade
• Once your course grade is in, University
Policy forbids changing a grade for any
reason other than professorial mistake
• It is impossible to do extra work to improve
your final or course grades
Main Thesis of Course:
• Management science models can make us
better decision makers and problem
solvers
• Do we have to use models to solve
problems and make decisions!!!???
• What is a model?
– A paradigm, a description and an explanation
of the relationship of the parts of the problem
to each other
– Can be self-fulfilling--a caveat
Just how do you make decisions?
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Emotional direction
Intuition
Analytic thinking
Are you an intuit, an analytic, what???
Problems
• Arise whenever there is a perceived
difference between what is desired and
what is in actuality.
• Problems serve as motivators for doing
something
• Problems lead to decisions
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Model Classification Criteria
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Purpose
Perspective
Degree of Abstraction
Content and Form
Decision Environment
Purpose
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Planning
Forecasting
Training
Behavioral research
Perspective
• Descriptive
– “Telling it like it is”
– Most simulation models are of this type
• Prescriptive
– “Telling it like it should be”
– Most optimization models are of this type
Degree of Abstraction
• Isomorphic
– One-to-one
• Homomorphic
– One-to-many
Content and Form
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verbal descriptions
mathematical constructs
simulations
mental models
physical prototypes
Decision Environment
• Decision Making Under Certainty
– all of mathematical programming
• Decision Making under Risk and
Uncertainty
– Decision analysis--tables, trees, Bayesian
revision
• Decision Making Under Change and
Complexity
– Structural models, simulation models
Mathematical Programming
• Linear programming
• Integer linear programming
– some or all of the variables are integers
• Network programming (produce all integer
solutions)
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Nonlinear programming
Dynamic programming
Goal programming
The list goes on and on
– Geometric Programming
A Model of this class
• What would we include in it?
Management Science Models
• A QUANTITATIVE REPRESENTATION OF A
PROCESS THAT CONSISTS OF THOSE
COMPONENTS THAT ARE SIGNIFICANT FOR THE
PURPOSE BEING CONSIDERED
Summary
• This course: models for improved decision
making
• 3 parts: DM under certainty
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DM under risk and uncertainty
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DM under change and complexity
• 3 exams, each worth 30%
• Types of models: planning, execution, control
• Models can help us substantially improve the
bottom line
IF INTERESTED IN IT CAREER, JOIN
AITP
• Application forms are in BA 604, the ISQS Office
and ON-LINE
– aitp.ba.ttu.edu
• Its important to affiliate yourself with a
professional organization
• Dues for the first few years are cheap if you join
as a student
• Discounts on airlines and hotels
• Low interest credit card
• It’s the way MIS (and other) majors market
themselves to recruiters.