Flashcards
Risk and Uncertanity
Cards in this deck (11)
- 1Regret for the decision optionsProfit from the best decision option - Profit ftom the decision otpion =
- 2Decision with the best outcome regret =0
- 3For other decision options reegret= Postive value
- 4maximum potential regretminimax regret decision rule is that the decision option selected should be the one which minimises the maximum potential regret
- 5Decision trees (Notes on website)are diagrams which illustrate the choices and possible outcomes of a deciison. The possible outcomes are usually give associated probabilities of occurence
- 6Rollback analysisevaluates the EV of each decision option. YOu have to work from right to left nd calcualte EVs at each outcome point
- 7PErfect informationGuaranteed to predict the future with 100% accuracy. Imperfect information is better than no ifnormation at all but could be wrong in its prediction of the future.
- 8value of perfect information iThe value of perfect information is the difference between the EV of profit with perfect informaiton and trhe EV of profit without perfect informaiton
- 9Sensitivity analysis isSensitivity analysis is a method of analysing the uncertainty in a saituion or decision
- 10Simulation modelscan be used to deal with decision problems where there are a large number of uncertain variables in the situiaiton.
Random numbers are used to assign values to the variables - 11—
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- Flashcards on Risk and Uncertanity, created by D A on 07/07/2018.
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