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Boston International College MBA II Trimester Emerging Concept of Management

This document discusses emerging concepts in management and decision theory. It outlines six steps in decision theory: defining the problem, listing alternatives and outcomes, identifying payoffs, selecting a decision model, and making a decision. It also describes types of decision environments, criteria for decision making like maximax and maximin, and uses examples to illustrate concepts like payoff tables and regret tables. Overall, the key points covered are tools and strategies for structured decision making under conditions of risk and uncertainty.

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Umesh Sah
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© © All Rights Reserved
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Download as PPT, PDF, TXT or read online on Scribd
37 views

Boston International College MBA II Trimester Emerging Concept of Management

This document discusses emerging concepts in management and decision theory. It outlines six steps in decision theory: defining the problem, listing alternatives and outcomes, identifying payoffs, selecting a decision model, and making a decision. It also describes types of decision environments, criteria for decision making like maximax and maximin, and uses examples to illustrate concepts like payoff tables and regret tables. Overall, the key points covered are tools and strategies for structured decision making under conditions of risk and uncertainty.

Uploaded by

Umesh Sah
Copyright
© © All Rights Reserved
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Boston International College

MBA II Trimester
Emerging Concept of management
 Minimizing the time and cost of Organization’s
Operation

 Increasing the efficiency of organization

 Delegation will be easier and more effective

 Make Organization Success


The Six Steps in Decision Theory

 Clearly define the problem at hand


 List the possible alternatives
 Identify the possible outcomes
 List the payoff or profit of each combination of
alternatives and outcomes
 Select one of the mathematical decision
theory models
 Apply the model and make your decision
• A state of nature is an actual event that may occur in the future.
• A payoff table is a means of organizing a decision situation,
presenting the payoffs from different decisions given the various
states of nature.

Payoff Table
Types of Decision-Making Environments

• Type 1: Decision-making under certainty


– decision-maker knows with certainty the consequences of
every alternative or decision choice
• Decision-making under uncertainty (without probability)
– The decision-maker does not know the probabilities of the
various outcomes.
Decision situation: An investor wants to decide which of the three property to buy.

Decision-Making Criteria:
Maximax, Maximin, Minimax, Minimax Regret
In the maximax criterion the decision maker selects the decision that
will result in the maximum of maximum payoffs; an optimistic
criterion.

Payoff Table Illustrating a Maximax Decision


In the maximin criterion the decision maker selects the decision that
will reflect the maximum of the minimum payoffs; a pessimistic
criterion.

Payoff Table Illustrating a Maximin Decision


Regret is the difference between the payoff from the best decision and all
other decision payoffs.
The decision maker attempts to avoid regret by selecting the decision
alternative that minimizes the maximum regret.

Regret Table Illustrating the Minimax Regret Decision


- The equal likelihood ( or Laplace) criterion multiplies the decision
payoff for each state of nature by an equal weight, thus assuming that
the states of nature are equally likely to occur.

Decision Values
Apartment building $50,000(.5) + 30,000(.5) = 40,000
Office building $100,000(.5) - 40,000(.5) = 30,000
Warehouse $30,000(.5) + 10,000(.5) = 20,000
- A dominant decision is one that has a better payoff than another
decision under each state of nature.
- The appropriate criterion is dependent on the “risk” personality and
philosophy of the decision maker.
Criterion Decision (Purchase)
Maximax Office building
Maximin Apartment building
Minimax regret Apartment building
Equal liklihood Apartment building
 Time –consuming Process

 Individual Domination

 Ambiguous Responsibility

 Not a perfect theory.

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