CHAPTER 1: INTRODUCTION TO MODELING

Introduction ......................................3
The Modeling Process ............................. .4
Think about figures 1, 2, 3
The gray box on p.6 emphasizes that the value of modeling goes far beyond giving "The Answer"

A Word on Philosophy ................................7
Concentrate on the discussion of "optimal solutions"

Types of Models ...................................11
Summarize!
We will concentrate on "symbolic models." Learn what this means in the context of other kinds of models.
The most important symbolic models are decision models. Remember the key point: the "performance measure."

Building Models ......................................13
Make sure you understand & remember all the concepts in Figure 4, especially their interrelationships.

Modeling with Data ................................17
All of our models will have dome data, but the most data-intensive ones will be the forecasting models.

Deterministic and Probabilistic Models .............19
Role of random variables

Iterative Model Building .........................20
More on Deterministic & Probabilistic

Modeling and Real-World Decision Making ....22
Learn the four stages, especially validation

A Final Perspective .........................23
Don't lose track of what it means to optimize a model, and what it doesn't mean!

Summary .............................24
The management buzzwords in the box may be out of style by now, but the modeling terminology is still good.

Key Terms, Self-Test Exercises, Discussion Questions................25
Red these as a review.  "How" is important, but only after you have thoroughly mastered "Why."

Introduction ........................................32
Example 1 Simon Pie ....................................33
Make sure you thoroughly understand Mr. Simon's situation at the time of the case. There are many decisions he has already made, some pf which show up in today's model as parameters. there are other decisions he will need to make later on. But right now he has to choose how much to charge per pie.
Make sure you can relate each box and arrow in the influence diagram on page 35 to the spot in the text where it is discussed.
By class time, be sure you understand what Figures3. 4, and 5 are FOR. Note my spreadsheet layout ( see link from website) is slightly different from these, and strongly different from Figures 6 and 7, the purpose is the same.

Example 2 Simon Pie Revisited ...................... .40
The processing cost model revews linear least squares regression; we'll also need least squares regression for the Forecasting unit.
In theory, you know all about least squares regression from Nath 1070, but I will not assume this :-)
Note that after Simon has been in business for a while, he can also use least squares regression to refine the
slope (price sensitivity) and intercept (demand potential) of the demand model

Example 3 Simon Pies ............................. .45
Skim