Decision Analysis: Part 2 p.102-124

Sonorola Case

Section 6: Decision Trees p.102-109

STUDY "Alternate marketing and Production Strategies" p. 103-104
Skip "Creating a Decision Tree"
        "Appending the Probabilities and Terminal Values" and
        "Folding Back" p. 104-109.  We will do this in class.
             The book's treatment is mostly advertising for a commercial product called TreePlan

Section 7: Sensitivity Analysis p.109-111

Sensitivity Analysis: studies the variability of a solution to changes in the model & input data

Expected Return as a Function of the Probability for a Strong Market

Be sure you understand what figure 16 means.  Don't worry about the nine steps for creating it.
compare figure 16 with "
Choice of Technology"  from Day 3 of this course.

Section 8: Decision Trees: Incorporating New Information p.111-117

STUDY  "A Market Research Study for Cellular Phones" p. 111
STUDY  "Computing Revised Probabilities Based on New Information" p. 111-114
Skip the discussion of Data Table on bottom of 11- and top of 114
STUDY  "Incorporating Posterior Probabilities in the Decision Tree" p. 114-117
Be sure you thoroughly understand Figure 19
But ignore the 9 step advertisement for TreePlan
STUDY "The Expected Value of Sample Information" p. 117

Section 9: Sequential Decisions: To Test or Not To Test p.117-124

STUDY the first paragraph of Section 9, p. 117-118
Skip the rest of Section 9; we will do it without TreePlan
Note Cell I101 of Figure 23, page 119 should be  10.5 not 2.25
STUDY the spreadsheet Sonorola-EVSI

Section 10: Management and Decision Theory p.124-125

Read this for perspective on why this chapter is important for your career

Section 11: Notes on Implementation p.126-127

Read this for perspective on why this chapter is important for your career

Section 12: Summary p.127-128

Read this for perspective on why this chapter is important for your career
You don;t have to memorize all the "Key Terms"
but if reading the definition doesn't make sense to you, ask for an explanation!