Decision Theory

Question 1

Are the two classifications of decisions according to the degree of certainty.

Answer 1

Deterministic Model and Probabilistic Model

Question 2

The manager assumes complete certainty and each strategy results in a unique payoff.

Answer 2

Deterministic Model

Question 3

Each strategy results in more than one payoff and tye manager attaches a probability measures to these payoffs.

Answer 3

Probabilistic Model

Question 4

Can be viewed as occurring on the two extremes of scale, which represents the range of assumed certainty.

Answer 4

Decision-making under certainty (DMUC) and Decicion-making under uncertainty (DMUU)

Question 5

The area between the two extremes of scale and aligns with the idea of probabilistic model is called as

Answer 5

Decision-making under risk (DMUR)

Question 6

These are the other classification of decisions that must be taken into consideration before creating a model.

Answer 6

Linear or non-linear behavior, static or dynamic conditions, single or multiple objectives

Question 7

Is a study that emphasizes technique for choosing tye best course of action when there are several options and it is impossible to foresee how they will work out. Its primary goal us to make a decision under risk and uncertainty.

Answer 7

Decision theory

Question 8

Conclusion of a process designed to weigh the relative
utilities or merits of a set of available alternatives so that the most preferred course
of action can be selected for implementation.

Answer 8

Decision

Question 9

Resolution made after thoughtful consideration.

Answer 9

Decision

Question 10

Entails doing all
required to determine which option is most suited to achieving the desired goal or
objective.

Answer 10

Decision-making

Question 11

Needs to include a set of
priorities, a system of goals or objectives, techniques for listing all possible and viable route options, and a way for determining which option is most beneficial.

Answer 11

Decision-making

Question 12

According to management theory, the fundamental role of management is to

Answer 12

Allocate resources to achieve organizational goals

Question 13

Why must a decision be made?

Answer 13

Resources are limited, human
desires and needs are diverse and limitless, and everyone seeks to meet their
requirements in a setting with finite resources.

Question 14

Are taken to achieve
these goals and objectives.

Answer 14

Decisions

Question 15

Helps in making a choice that will best meet their needs.

Answer 15

Decision Theory

Question 16

There is friction between two persons while they are working in an organization because of their different

Answer 16

Behavior, attitude, mindsets

Question 17

Each department in an organization has a goal of its own, but they are
dependent on the general objective of the organization.

Answer 17

Decision and Conflict

Question 18

Decision-makers must take into account all these elements of decision-making to minimize the impact of conflicts across departments or between subordinate goals to achieve the overall objective of the organization.

Answer 18

Through the fire

Question 19

It is crucial and requires the application of multiple
considerations such as psychological, philosophical, economic, sociological,
statistics, and even political science and operations research.

Answer 19

Decision Theory

Question 20

What are the two phases of decision making?

Answer 20

1. Decision-maker sets up a structure of details to come up with the decisions.
2. Decision-maker is now in the process of analyzing all the
   considerations and the process of selecting the optimal strategy.

Question 21

Decisions can be categorized generally as

Answer 21

Strategic and Administrative Decisions

Question 22

Involves the external environment of the organization

Answer 22

Strategic Decisions

Question 23

Are made for daily operations.

Answer 23

Administrative Decisions

Question 24

Other classifications relating to the nature of problem are

Answer 24

Programmed and Non-Programmed Decisions

Question 25

Which provide solutions for clearly structured and repetitive problems.

Answer 25

Programmed Decisions

Question 26

Which answer unusual or non-routine problems.

Answer 26

Non-Programmed Decisions

Question 27

Some types of decisions rely on their scope, complexity, and the measurement of involved people in the decision which are called

Answer 27

Individual and Managerial Decisions

Question 28

May include solutions to ethical dilemmas for instance.

Answer 28

Individual Decisions

Question 28

Are larger in scope and more complex.

Answer 28

Managerial Decisions

Question 29

In the aspect of the sphere of interest, whether it is political, economic, or scientific, etc., decisions can be classified as

Answer 29

Static or Dynamic Decisions

Question 30

Need only one decision

Answer 30

Static

Question 31

A series of decisions

Answer 31

Dynamic

Question 32

Steps in Decision Theory Approach

Answer 32

1. Decision-maker must list all the possible strategies that are feasible and need to be considered in the decision. 2. After the alternatives are listed, the latter projects and enumerates the states of nature known as future events. 3. Continuing the process, payoff tables will then be constructed. In this step, each payoff table created contains one viable alternative paired with a state of nature.

Question 33

When decisions made by the managers reach complete certainty on the scale of assumed certainty.

Answer 33

Decision-making under certainty (DMUC)

Question 34

This model provides an overview in which there is more than one outcome, and managers know the probability measure of each outcome.

Answer 34

Decision-making under risk (DMUR)

Question 34

This scenario of decision-making can be described as measurable wherein managers know the basis for deciding. Moreover, It implies that the state of nature is clear and highly probable which follows the approach of a deterministic model.

Answer 34

DMUC

Question 34

The optimal strategy in decision-making under risk is identified by the strategy with the

Answer 34

Highest expected utility (or highest expected value)

Question 34

Is the most popular and widely used method in decision-making under risk. It is defined as the product of payoffs of each state of nature and probabilities of the respective states of nature

Answer 34

Expected Monetary Value (EMV)

Question 35

Is equal to the maximum of the EMVs of all decision alternatives.

Answer 35

Optimal Expected Monetary Value (OEMV)

Question 35

Is formulated exactly in the same way as decision-making under risk, the only difference is that **no probability** to each strategy is attached.

Answer 35

Decision-making under uncertainty (DMUU)

Question 35

Two approaches to solving the problem of decision-making under uncertainty:

Answer 35

Pessimistic and Optimistic Approach

Question 35

Determines the best possible outcome in each strategy.

Answer 35

Criterion of Optimism

Question 35

Determines the worst possible outcome in each strategy.

Answer 35

Criterion of Pessimistic

Question 36

The criteria that minimize the maximum regret.

Answer 36

Criterion of Regret/Opportunity Loss Matrix

Question 37

Assumes that all probability of occurrence for the state of nature are equal, and thus each state of nature is equally likely.

Answer 37

Equal Probability Criterion

Question 38

In criterion of _____, the idea is to choose the maximum of the maximum values or Maximax

Answer 38

Optimism

Question 39

Under this criterion, first, determine the worst possible outcome in each strategy (row minimums), and select the best of the worst outcome. This process is also known as Maximin.

Answer 39

Pessimism

Question 40

In each column, identify the highest element and then subtract all the individual elements of that column, cell by cell, from the highest element to obtain the corresponding column of the regret matrix.

Answer 40

Criterion of Regret/Opportunity Loss Matrix Applied

Question 41

Is applied when no objective evidence is present. As these objectives are not evidence in the problem, equal probabilities can be applied to each state of nature.

Answer 41

Equal Probability Criterion or Laplace Criterion/Criterion of Insufficient Reason.

Question 42

This model provides an overview of the competitive situations in which competitors or opponents apply logical processes and techniques to choose a strategy that best suits their situation.

Answer 42

Decision-Making Under Conflict and Competition

Question 43

Which means that whatever one gains, one will lose the same.

Answer 43

2 Person Zero Sum Game

Question 44

If a single strategy is chosen by the player.

Answer 44

Pure Strategy Game

Question 45

It falls under making decisions under uncertainty. It is also known as the weighted average criterion, which is a compromise between the optimistic (maximax) and pessimistic (maximin) decision criteria.

Answer 45

Hurwicz Criterion (Criterion of Realism)

Question 46

Only one decision is made at a single stage, and the available data are not subject to revision. However, there are situations where it is necessary to make several decisions simultaneously. Due to the impact of one decision on subsequent decisions, these problems have become a multistage problem.

Answer 46

Decision Trees

Question 47

In cases where the business requires a sequence of decisions, it can utilize a functional device known as a __________. It is a schematic representation of a decision problem.

Answer 47

Decision Tree

Question 48

Decision tree consists of

Answer 48

nodes, branches, probability estimates, and payoffs

Question 49

There are two (2) types of nodes:

Answer 49

Decision node and Chance node

Question 50

It is represented by a square, which requires a conscious decision to be made, to choose one of the branches that emanate from the node.

Answer 50

Decision node

Question 51

There are also two (2) types of branches:

Answer 51

Decision branch and Chance branch

Question 52

It is denoted by parallel lines that represent a strategy or a course of action.

Answer 52

Decision branch

Question 53

It is represented by a single line that represents a chance-determined event.

Answer 53

Chance branch

Question 54

When a branch marks the end of a decision tree, it is not followed by a decision, or the chance node will be called a

Answer 54

Terminal branch

Question 55

______ can either be positive or negative. They can also be associated with a decision or chance branch. These can be placed alongside the appropriated branch, except that these are associated with the terminal branches of the decision tree will be shown at the end of these branches.

Answer 55

Payoff

Question 56

There are no chance nodes, and only one decision is involved in a

Answer 56

Single-stage deterministic decision tree

Question 57

It contains at least one chance node and involves the making of only one decision.

Answer 57

Single-stage stochastic decision tree

Question 58

It contains at least one chance node and involves the making of a sequence of decisions.

Answer 58

Multistage stochastic decision tree