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Spreadsheet Modeling & Decision Analysis
A Practical Introduction to Management Science
Cliff T. Ragsdale
"Uncertainty is the most difficult thing about decision-making. In the face of uncertainty, some people react with paralysis, or they do exhaustive research to avoid making a decision. The best decision-making happens when the mental environment is focused. …That fined-tuned focus doesn’t leave room for fears and doubts to enter. Doubts knock at the door of our consciousness, but you don't have to have them in for tea and crumpets."
-- Timothy Gallwey, author of The Inner Game of Tennis and The Inner Game of Work.
Y = f(X1, X2, …, Xk)
See file Fig12-2.xls
1) Identify the uncertain cells in the model.
2) Implement appropriate RNGs for each uncertain cell.
3) Replicate the model n times, and record the value of the bottom-line performance measure.
4) Analyze the sample values collected on the performance measure.
If 6*RAND( ) falls INT(6*RAND( ))+1
in the interval:returns the value:
0.0 to 0.9991
1.0 to 1.9992
2.0 to 2.9993
3.0 to 3.9994
4.0 to 4.9995
5.0 to 5.9996
TriangularCB.Triang(min, most likely, max)
Click Insert Function icon
Select CB option
Select RNG function
Click Define Assumption icon
Examples of Discrete Probability Distributions
Examples of Continuous Probability Distributions
See file Fig12-9.xls
Q: Would the statistical results be the same?
Note that as n increases, the width of the confidence interval decreases.
Note again that as n increases, the width of the confidence interval decreases.
See file Fig12-20.xls
Lead Time (days):345
See file Fig12-30.xls
Using Trends Charts to Compare Reorder Policies…
Initial CostProb. Of($1,000s)
See file Fig12-40.xls
Generation Capacity per Million $ Invested
Normal Dist'n Return Parameters
Return Correlations by Fuel
See file Fig12-49.xls