Want to be Become Decision Scientist: The Art and Science of Decision Making | Ash Narayan Sah | Skillshare

Playback Speed


  • 0.5x
  • 1x (Normal)
  • 1.25x
  • 1.5x
  • 2x

Want to be Become Decision Scientist: The Art and Science of Decision Making

teacher avatar Ash Narayan Sah

Watch this class and thousands more

Get unlimited access to every class
Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Watch this class and thousands more

Get unlimited access to every class
Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Lessons in This Class

14 Lessons ()
    • 1. Introduction

      2:16
    • 2. Statistical decision Science introduction

      5:52
    • 3. Elements of decision theory

      6:51
    • 4. Decision making under certainty

      8:36
    • 5. Decision making under uncertainty Introduction

      8:36
    • 6. Maximax Criterion

      3:46
    • 7. Maximin Criterion

      3:36
    • 8. The minimax regret criterion

      5:00
    • 9. Equally Likely Laplace Criterion

      2:07
    • 10. Hurwicz Criterion

      4:08
    • 11. Decison making under risk

      9:12
    • 12. Expected Value of Perfect Information

      6:25
    • 13. Decison making under risk Example using Excel

      8:07
    • 14. Decision tree

      11:28
  • --
  • Beginner level
  • Intermediate level
  • Advanced level
  • All levels

Community Generated

The level is determined by a majority opinion of students who have reviewed this class. The teacher's recommendation is shown until at least 5 student responses are collected.

24

Students

--

Projects

About This Class

The Decision Science course offers 14 video lectures on how to make decision. Students often don't unedrstand even the difference between risk and uncertainty. My course enlightens readers on this and provides you excellent materials on decision making under risk and uncertainty. 

Meet Your Teacher

Hi, 

I am Ash Narayan Sah. I am a PhD in economics area. I am working as assistant professor and teach engineering economics. I have specialization in econometrics, a quantitative branch of economics. 

See full profile

Class Ratings

Expectations Met?
    Exceeded!
  • 0%
  • Yes
  • 0%
  • Somewhat
  • 0%
  • Not really
  • 0%
Reviews Archive

In October 2018, we updated our review system to improve the way we collect feedback. Below are the reviews written before that update.

Why Join Skillshare?

Take award-winning Skillshare Original Classes

Each class has short lessons, hands-on projects

Your membership supports Skillshare teachers

Learn From Anywhere

Take classes on the go with the Skillshare app. Stream or download to watch on the plane, the subway, or wherever you learn best.

Transcripts

1. Introduction: Welcome to my This isn't science schools. Hello. My name is Doc Prensa. I'm a PST on my specialization is in. Did an analysis on econometrics. I am having dissing experience off around eight years. Andi, I have also your books one on the journalists using Microsoft Excel on another book on straightest export management using Emma sex. So I'm sure that you will be getting 100% or about the scores. One more thing in the schools this isn't making under certainty or with perfect information is not included. Where you stop X covered in this course indirection toe. This is insane elements soft. This isn't your e. This isn't making under set NT. However, here I will give very, you know, a small description off these. As I said that this particular topic is not included in detail in this particular course. This isn't working under uncertain entity where various criterias are useful. This isn't making when you don't have, you know, probability estimate or you don't know the various decision making. Then I will be discussing. This isn't making on the list on under this, two important topics are covered. This isn't expected monetary value approach on inspector value or information. OK, eso on. Finally, I will be discussing This isn't three. In this particular course, I hope you will enjoy the schools. 2. Statistical decision Science introduction: in decision, I will take up started sticker decision theory. When is the study operating a very competitive and uncertain involvement? Man is this Always tried to reduce uncertain nitty and make better s two males off What will happen in the future? This objective is attended by the season analysis techniques. This isn't duty, listener. This isn't story reverts it from one hole. Making the seasons by the money is okay on when future event is characterized by uncertainty. Nitty, this is in the last analysis allows us to make optimal early season. Okay, if you said analysis decision from a seed of possible, this isn't ultimatums. Okay, If this isn't maker men's obvious to identify the problem, okay? This is a maker, maybe. Oh, you know, an individual producer or businessman isn't so. His main job is to identify the problem, try to understand and know the cause off the problem on through Fear action plan or it's magnification. Okay. If he or see feels that the decision is not optimal, then some more information is so okay. However, uh, the fact of the matter is that the season cannot be unduly delayed. Okay, Thus, making this isn't on time is important as the lady season means lost opportunities. Okay, so, uh, this is, you know, uh, they import himself. Uh, making right. This isn't on. Right? Effective decision making requires the following things. Okay. I didn't defy the I identify and define the problem. Identify the possible alternatives of a level. Okay. Have all weighed each possible alternative. Select the best Internet. So these are full stems involved, you know, in effective decision making. The decision making process is wanted him. This isn't working. Process in quantitative way is very aptly put by is right. Brought us as okay. The quantitative approach is based off on data. Okay, five information and lost. So please keep this in mind. It consists often orderly and systematic framework off defining, analysing and solving problems in an upset and scientific. Okay. The quantity to get prose is not intended to replace perception, good judgment and common sense. The tournament Ellis isn't so competent, Minister. Well, it is intended toe improvement is us. This isn't making ability on to provide them and accountable means or justifying and evaluating their own men. Israel bombs. So I hope the meaning off you know, and the process off. Our decision making process in quantitative manner is now clear to you. Okay. The intended power with regard to decision making this with the man is okay. However, a status tickle or quantitative analysis it to the man is a for making optimal. This isn't in this chapter. We will introduce strange to decision theory, which is an analytical and systematic approach to the study of this isn't making process in grave in this isn't duty. We select a decision from a set off. Possible, maybe again when few, sir is uncertain. Okay. And the goal is to optimize the p off or for the score benefit. So this is all about introduction toe Statistical decision to Okay, Thank 3. Elements of decision theory: in the slick, Sir, I will be discussing about various elements off decision theory. The important elements of dissident Riad, other natives, a student self nature, I feel and be off. We will be. We will discuss one by one these four elements. I don't mediums. The various under May tips have a level toe. The decision made. Okay, so please no don't. Alternative means various alternative level level toe their decision makers. Whether decision maker faced with alternatives, the decision making involves choosing among two or more possible alternatives with, if you choose the best alternative so that the benefit or feel will be maximized. Okay. For example. For example, suppose the company has ₹60. 60 cruise off castle. This case surplus can be used for various alternatives. Okay, First alternative have level with the company's. Distribute the cast as diffident. Okay, this is one moment of making reinvest the gas in the company. Okay, give the cast for meeting the future of application. So there are three under natives. Okay, on various alternatives or courses. Affection. The decision maker has has some control. OK, so this is the meaning off. You know, alter natives are various options at the level to the decision maker. Fine. Okay. Now government starts off nature A strips off, major off outcomes. Often even our uncontrolled occurrences. Okay, states off. Nature's off outcomes off an even are uncontrolled occurrences their students off future. Please note down the students off meter correspond to the possibly future events which are not in the control off the season make. Okay, Now, the state's off nature are mutually exclusive events, meaning when one estate off nature occurs, it rules. Hold the prints off all other estates off nature and collectively exhaustive. Miss all the states off nature must be identified by the decision. Okay, so please note down that state off nature must be mutually exclusive on collectively exhaustive events. Okay, now, this is the meaning. Low streets off nature on states off nature are not, you know, in the control of this is a maker, and it refers to Okay, let me underline this. The state off nature correspond toe possible future events which are not in the control off , Mrs. And make no bill is the resulting may benefit to the listen maker that arises from selecting a particular alternative in a particular stewed off nature. So the office, the benefit. Okay, benefit. So that decision makers that arises when you select a particular out of knitting in a particular straight off nature on you know, the payoff people. Ah, list various be off table list. Very assaultive natives, streets off nature and entries in the people are Bill. So please look at this. Okay, in general, the column on toe pay off a little corresponds to the various donated. Okay, so please look at this stable. Okay. On, uh, let me. Yes. So this is our be off people. Andi, I in general, the column off the tee off people correspond to the various alternatives. You can see there are alternatives like a one, a tow, a tree on in general. And alternative several levels. This is a maker. The rules off the table be off table, correspond to the various states off nature. So please, no, I don't. The rules off the table here. Okay, This one. So this one is, you know, states off nature. So I stayed one state toe straight. Three straight. Okay, on the end result, the payoff people are the be off. Okay, so be subscript 11 OK, so these are I feel okay associated with, you know, nine teams, various alternatives on the streets off nature's so thes are the various, you know, elements off. Oh, you know, maybe a cell. A man himself. Decision theory. Okay, so this is all about, you know, elements off. This isn't theory. Okay, Thanks. 4. Decision making under certainty: indecision I will be discussing about This isn't making under uncertainty condition under uncertainty. This isn't maker has no no less. Okay, so, please, or down this This isn't maker has no knowledge about the probabilities off various states off nature. Okay, so you cannot estimate the probability off Baddie Issa stewed something. Nature consequently expected payoff off each other Native cannot be off easily. Maybe cannot be estimated. Okay. For example, while launching a new product in the market, the company has generally no idea how market will create The new product is there are no historical data or past, uh, information or experience have a level with the company because it's a new product. No, uh, these criteria, you know, whatever, criterias Ah, with which these decisions are made. You know, this criteria will be helpful in doing a best case or worst case analysis. Okay, so in case off, you know, uncertain condition. We live love e criteria. Like best case or worst case scenario, it is to be kept in mind that different criteria will lead toe different decision recover nations. Okay, Now the, uh does the decision maker must understand this and then select the specific criteria for decision making under uncertain conditions. Okay, fine. Uh, will be considered one example on. Look at the example. The following example, we will consider the consider the following example to illustrate how the season is made on the uncertain nitty, an investor is planning to make some investment. The various alternatives in which he or seek and put his hurt money are saving bank account , were not dealt negatives extra. Pose it another alternative, he or seeking by borns. Another alternative. Okay, your sick and invest in, you know, social friends. You can directly buy stocks or the disc early would be, Yeah, are here. She can also, you know, invest money in commodities like cool. Okay. No, the return on money from each instrument is dependent upon the state off the economy. Okay, so, please, uh, now we're talking about State's off nature. He or she can invest or select anyone off the instrument on the return on these, you know, depends on streets off nature. And there are, you know, three states off nature. I wouldn't be fired first is you know, uh, three year strips off nature I didn't defied. As you know, your growth scenario, Mordred Growth scenario and high broad Senate. So these are the three students often nature or three possibilities how the economy will grow in coming years. Okay. However, the probability off auctioning off the Evo streets off nature and not be estimated or is not level to the investor. Okay, So please keep this in mind Is not every level he or she is not in a position toe. Estimate that Okay. And that is why thesis, you know, type of decision making. Scored bases in making under uncertainty. Now the bill they will pour This problem is given like this now. Ah, in case off low growth scenario, if you put your money in savings bank account and they will get three person read off Britain if you put your money in fixed deposit, then 7.5% Uh huh. In gold. 10% return. You will get in company bone. You get it. Percent foreigner on in Mutual fund rhythm is negative. 3% and iniquities return is negative. Well, so these are the returns associated with low growth scenario. Okay, in off each of the you know, instruments. However, if the street off nature is less a moderate group. Then if you are putting your money in saying bank account and you will get four person here , you will get 8% year. You make it will percent in company board, you will get 10 percents in mutual fun. You'll get will percent. Okay. And in equity. Okay. In the stops, you will get positive. 15% return on your money in gives off, you know, high growth scenario. Ah, you know Piper sent in picks. Apollo 8.5% in bold 18%. Okay, Andi in company born 11.5% in case off. You know, Marshall Fund is giving you in high gross in area 21 person it offered in on your money on disease providing you the highest 25% return. In case of you know, I grow scenario. Okay? No. Ah, the criteria used for decision making under uncertainty Entity are Ah, you know, these are the falling cracked areas, the optimistic approach that is also called maximum approach. Okay, on then, we have a conservative approach at this called maximum mean approach, then equally likely approach also for lap last criterion. Then we have also already scored her risk rate. Arian off. This isn't making under uncertainty condition. And then we have a mini maxi recreate approach also called Mini Max Gideon off making this season. OK, so these are the, uh, five six criteria which can be used for decision making under uncertain conditions. Onda, we will be discussing these criteria one by one in next session. Okay. Thank you. 5. Decision making under uncertainty Introduction: indecision I will be discussing about This isn't making under uncertainty condition under uncertainty. This isn't maker has no no less. Okay, so, please, or down this This isn't maker has no knowledge about the probabilities off various states off nature. Okay, so you cannot estimate the probability off Baddie Issa stewed something. Nature consequently expected payoff off each other Native cannot be off easily. Maybe cannot be estimated. Okay. For example, while launching a new product in the market, the company has generally no idea how market will create The new product is there are no historical data or past, uh, information or experience have a level with the company because it's a new product. No, uh, these criteria, you know, whatever, criterias Ah, with which these decisions are made. You know, this criteria will be helpful in doing a best case or worst case analysis. Okay, so in case off, you know, uncertain condition. We live love e criteria. Like best case or worst case scenario, it is to be kept in mind that different criteria will lead toe different decision recover nations. Okay, Now the, uh does the decision maker must understand this and then select the specific criteria for decision making under uncertain conditions. Okay, fine. Uh, will be considered one example on. Look at the example. The following example, we will consider the consider the following example to illustrate how the season is made on the uncertain nitty, an investor is planning to make some investment. The various alternatives in which he or seek and put his hurt money are saving bank account , were not dealt negatives extra. Pose it another alternative, he or seeking by borns. Another alternative. Okay, your sick and invest in, you know, social friends. You can directly buy stocks or the disc early would be, Yeah, are here. She can also, you know, invest money in commodities like cool. Okay. No, the return on money from each instrument is dependent upon the state off the economy. Okay, so, please, uh, now we're talking about State's off nature. He or she can invest or select anyone off the instrument on the return on these, you know, depends on streets off nature. And there are, you know, three states off nature. I wouldn't be fired first is you know, uh, three year strips off nature I didn't defied. As you know, your growth scenario, Mordred Growth scenario and high broad Senate. So these are the three students often nature or three possibilities how the economy will grow in coming years. Okay. However, the probability off auctioning off the Evo streets off nature and not be estimated or is not level to the investor. Okay, So please keep this in mind Is not every level he or she is not in a position toe. Estimate that Okay. And that is why thesis, you know, type of decision making. Scored bases in making under uncertainty. Now the bill they will pour This problem is given like this now. Ah, in case off low growth scenario, if you put your money in savings bank account and they will get three person read off Britain if you put your money in fixed deposit, then 7.5% Uh huh. In gold. 10% return. You will get in company bone. You get it. Percent foreigner on in Mutual fund rhythm is negative. 3% and iniquities return is negative. Well, so these are the returns associated with low growth scenario. Okay, in off each of the you know, instruments. However, if the street off nature is less a moderate group. Then if you are putting your money in saying bank account and you will get four person here , you will get 8% year. You make it will percent in company board, you will get 10 percents in mutual fun. You'll get will percent. Okay. And in equity. Okay. In the stops, you will get positive. 15% return on your money in gives off, you know, high growth scenario. Ah, you know Piper sent in picks. Apollo 8.5% in bold 18%. Okay, Andi in company born 11.5% in case off. You know, Marshall Fund is giving you in high gross in area 21 person it offered in on your money on disease providing you the highest 25% return. In case of you know, I grow scenario. Okay? No. Ah, the criteria used for decision making under uncertainty Entity are Ah, you know, these are the falling cracked areas, the optimistic approach that is also called maximum approach. Okay, on then, we have a conservative approach at this called maximum mean approach, then equally likely approach also for lap last criterion. Then we have also already scored her risk rate. Arian off. This isn't making under uncertainty condition. And then we have a mini maxi recreate approach also called Mini Max Gideon off making this season. OK, so these are the, uh, five six criteria which can be used for decision making under uncertain conditions. Onda, we will be discussing these criteria one by one in next session. Okay. Thank you. 6. Maximax Criterion: in decision. I will be discussing, uh, the optimistic approach or what is gored. Maxim Max criteria off. This isn't making under uncertainty situation. So this isn't making Using this criteria is based on best possible outcome. So please, no good. This approach. Is there a prose taken by the optimistic and aggressive decision maker? Okay, so the decision maker is highly optimistic. Okay, The users of this approach are very optimistic, evolved future outcome. And I think that the best possible outcome always occurs. Okay, so this is the meaning off, you know? You know, the users off this approach are very optimistic. An optimistic and aggressive decision makers. Such subsist for, you know, such us for highest feel the pro Caesar is given here. First, we will find a maximum bill associated with each. This is another. Okay, so we on this first, Okay. Next. Select the decision under maybe associated with maximum off. Maximum deal. Okay, so that is where the score Maxine, Max, Maximum off maximum. Okay. No, uh, in the example. Okay. Now we will consider this in the above example, using the optimistic great area. Okay, The maximum off maximum return is 25% coming from investment in equities. Okay, so refer this, uh, you know this particular So this is you know, these, uh, scenario provides, you know, this is a maximum. Have you done, uh, provided? Okay, these are on that is provided under high growth scenario. Now you can see maximum off maximum. So among these maximum returns under all three, you know, strips off nature, you know, maximum off maximum is 20. Passion on that is coming from, you know, equally investment in equity does an optimistic decision maker invests, will invest money in equities. So this is how you know we make the season? You know, uh, by applying. You know Maxim Max. Great, Davia. Fine. Okay, so this is all about you know, Maxie Max criterion off the season making under uncertainty. 7. Maximin Criterion: in this lecture, I will discuss about maximum in Didion or what is called the conservative approach. Oh, making this season under uncertain conditions now, using this great area that the season his based on worst possible outcome. Okay, uh, this is the approach taken by I am not pessimistic and conservative. This isn't so. There are people, uh, are very pessimistic, you know? So pessimistic people always thing that was possible thing will happen. The users off this approach are very pessimistic about future outcome and think that the worst possible outcome always occurs. So, please, I remember this. A pessimistic and conservative this is in maker looks for lowest feel. Okay, so please give this a mind. Okay? Now let us let us look at this, you know, be off table on. Duh. You know that, uh, the Louis feel, you know, associated with each other. Maybe is, uh, we have a net worth is score low growth scenario. Okay, In low growth scenario, we have lowest playoff associated with each alternative. Okay? Or each investment instrument on it is given here, you know. So I have reproduced these be off in last column. No, no. What is the great area, you know? First, what do you do? First we find a minimum. Be off associated with these decisions, OK? Eso under this approach, you have to find out. Minimum be up. Associated with is this is next. You select that this is an alternative associated with maximum or minimum. Okay, maximum off minimum deal so you can see these Are, you know, minimum bill associated with these? This is an alternative. Okay, Now, maximum off. These minimum is 10%. Okay, which is associated with gold investment. Okay, so, uh, in the above example, using the pessimistic criteria, the maximum or minimum return is 10% coming from investment in gold. Okay. On the same pessimistic decision maker will invest money in board. Okay, so this is all about, you know, Maxie mean great area or the conservative 8. The minimax regret criterion: indecision. I will be discussing about the mini Max regret approach or simply regret criterion off decision making under uncertainty condition in this approach. If this isn't maker tries to many miles. He's had a personal loss. Okay, Others will be lost or regret is the next best for gone under. Maybe. Okay, so please remember the meaning off person will be lost or agreed is the next best foregone alter maybe. OK, so when they this isn't maker, just the best feel pretending to where this is another. Maybe Then there is no opportunity, loss or injury. Okay, so please give this man. That is, if the decision makers select sister decision to invest money, for example, in saving bank account. According to Maxie Mean criteria. Okay, so he called maximum Grady that this is a maker gives three person return under low, broad scenario. Then he's her regret or opportunity. Lost would be three miners, three that zero. Okay. However, letter if the decision maker realizes that he or C would as well as well have a return off my person, but ending do saving Bank it around. Okay, this is another. Maybe under this scenario, high group then he's her Personally loss or regret is five minus three. That is stupid. Okay. Similarly, with regard to a scenario off moderate growth for the decision under an ideal our this is an alternative is seven bank account. Okay, so he's regrade or a personality loss will be poor minus three. That is one person as the regret people poor is this is an alternative can be constructed in this likewise minute. Okay, Andi, the great table is produced here in table number seven. OK, now you can see suppose according to maximum criteria you have selected. You know, this low brought scenario on these are eso in if you're selecting people and on in this case, you are regretting zero. But let Iran are in case off moderate scenario. Your loss is one person on a two person. Okay? Similarly, for all our this is an ultimate dips you can generate, you know, regret people like this or opportunity lost, uh, associated with use decision. I have made it okay. No, you can see the maximum regret for east. This is an older maybe. OK, you can see is here. Okay. In high growth column. You Quincy. Okay, would be be off, like, 2% 1% 8% 3 point I cushioned 24% and 37% opportunity loss in case off, you know, equity. Okay, the minimum. Very great. Minimum recreate or minimum opportunity. Lost among these is one pushing. Okay, corresponding to fix disease. Fixed deposit. This is an ultimate. Okay, So according to the great or opportunity lost Criterion, the best decision are the decision. Older, maybe. Okay. Selected for investment is the fixed people's instrument. As for the mini max, you know the great approach. So, uh, this is all about, you know, this isn't making in uncertain condition by, you know, using various criteria. When you are not in a position toe, provide estimate, probability estimate for, you know, two different starts off nature. Okay. Thank you. 9. Equally Likely Laplace Criterion: in decision, we will be discussing about equally likely credit area. Also called Lap last Criterion in Love loss Great alien, The decision maker ASM Stack There is equal likelihood off occurring each of stewed off nature and compute expected payoff for East. This isn't alternative. Okay, which is given in this table. Now you see that there is equal likelihood that are 33% chance that low growth scenario will prevail on. Similarly, there is 33% chance that moderate growth scenario will prevail on similarly high growth scenario will prevail on Then we find the specter payoff for is this is an eternity on you can see that expected Pio coming according to love plus criteria is you know, 4% for saving bank account on 8% or fixed Oppose it on a four goal It is coming 13.33% Okay , on before Company born, it is coming 9.83 on for mutual fund notice 10% on for equities it is 9.33 So the the highest among these is redone on bold investment. So according toa ah love plus criterion that decision maker Select your investment in gold instrument. OK, so this is how you know, uh uh, this season, making under uncertainty, done using a love last great area. Or equally likely, crediting. Okay. Thank you. 10. Hurwicz Criterion: indecision I will be discussing are prescribed Irian. So far, we have seen that most optimistic and most pessimistic criteria are the Maxim Max on maximum in respectively, which are too extreme wears off making this season. Okay, so please keep this in mind. Therefore, it would be realistic to select appropriate combination off. You know this to extreme situation. Okay, this approach was suggested by her a week. Okay. On. In this case, the degree off optimism between extreme pessimism is given by, you know, Jiro Helu. An extreme optimism is given by one. Okay, so, uh, degree off extreme pessimism zero An extreme optimism is one on it is denoted by, you know, Alfa. And you know that Alfa lies between zero in in this uproot it. The season index is defined as this. Okay, so you can see this is the This is an index. We're all far. Is your degree off optimism which is multiplied by maximum? Am I capital in my on you can see capital am I stand for maximum pio corresponding toe, Iet decision alternative plus one minus alpha might be applied by small m I am that is minimum be off corresponding do I yet? Bases and alternative. Okay, so, uh, the calculations are given in table six on now you can see. Okay, Bye. So in this case, you know the degree off optimism Waas used, you know, 0.6 on obviously. So degree off, you know, pessimism will become a point, you know, Uh, sorry. The degree off optimism or pessimism, its use in here 0.6 and degree off optimism. It's use in point, for that is 1.6. So they expected our weather in every off these two is 20.6 multiplied by. You know, uh, my plus, uh, maximum bill, which is coming. You know, Piper said on it is coming three point. So where did everything is coming? Three point. It gives up saving bank account some lovely four fixed deposit. It is coming. Seven point, uh, nine person. Okay, Onda, you can see for all other options for equities, it is coming. 2.8 on the highest is coming for ward. That is starting point to on hands. According Toa Arvis criterion that this isn't maker suit. Select gold instrument for investment purpose. Okay, so this is how you can use you know, had this crazy idea for making the, you know, the season en gives off uncertain condition. Okay. Thank you. 11. Decison making under risk: indecision I will be discussing about This isn't making under risky situation on Dhere, I would first like toe make a distinction between ah, risky situation on uncertain. Okay, uncertainly be refers to its situation. We have already discussed this isn't making an uncertain energy in previous stations. So uncertainty refers to a situation where the season maker has no no less about the probability off the state's off occurring. Okay, so here you don't have, you know no lives or you cannot estimate the probability off starts off name. However, risk refers to a situation where this is an maker is ever off Almost possible streets of nature or outcome on could add as probability toe he's stood off nature. So please give this in mind that unsub unity is a situation where you don't know all starts off nature OK, are you don't have any mechanism toe Fine. That is the state's off nature. Not only that, you are not in a position to, you know, attach probability toe Do the States also, however, in a risky situation. Okay, our risk refers to a situation where decision maker is aware off all possible if states he knows what other all other, Maybe more possible. Various. A state's off nature or outcome on. He's also some idea off, you know, estimating or providing probability to each outcome. Or he just stood off nature. Okay, uh, this isn't make good under risky situation has some No lease regarding the street off, Major. This is what I was discussing. He or Seacon also attach Probably Tito these streets off nature. Okay, in such circumstance, with the help of some imports collected bother Decision maker. The probability estimate for the ah Krenzel stewed off nature are outcome is assigned or can be estimated. Okay, so please give this in mind. Okay? No. Next for each. This is an alternating given the straight off nature expected value is computed given by the following formula. Okay, So this is the formula. We are having to find the expected payoff for east. This isn't alternate. Be okay on. You can see. Here it is. The summation off. Be off. Ah, product off the off with the respective probabilities so you can see X I stand for be off associated with east. This is an alternative in various sisters off nature on P. I is probability Okay. Now, using the spectrum monetary value criterion, that is insult you E m p b season maker, select the alternative with the best expected payoff. So please keep this in mind. Okay? So according Toa inspector, monetary value cried Area the decision maker select the best expected bill. Okay? No, this is how we make the season under risky situation or under risk. Fine. We consider one example here to explain this approach to decision making. I'm having one example with me. Let's say today education is considered as investment. Okay, A student choice for a professional or non professional goals depends on kind off job and Pakis the gate by doing a particular course to make the season is today. Use the prospect off highly paid job as either low, medium or high. So there are three streets off nature. Okay, The following payoff table saws. The projected Pakis in rupees lacks okay. No, Gore's professional goals like M B A and M C. I am calm, is in non professional goals and others, like humanities, are also considered as non professional job here. So particularly M B A and M C. Hey is considered here as professional goals, so there are three. This is an alternative, whether it's students should go for in vehicles or m Conchos or other course. And the probably be on various astute SOF nature are, you know, prospects off getting, you know, getting the kind of Pakistan. So when a particular student decides to take, you know, professional course, there is a 50% probability that he or she will get a pack, it's awful s a to point b. Lack on. There is 30% probability that they student will get the Packers off. For luck on, there is only 20% chance that the student will get a pack is off. It looks similarly students who beat who have decided that they will prefer or go for m Come course, The probability is there is 50% probability that they will get packers off on and every backers off 3.5 black on destructive pretension that they will get a practice off five blacks on. There is 20% chance that they will get a package off six life. Similarly, you know the part of permitting this is an Internet Davies for other courses, Okay? No. Ah, using a spectator The monetary value approach, the optimal decision s strategy strategy is, you know, expected monetary where Look for bases in alternating one that is going for and be so Emmy expected monetary value for doing MBA is coming three point on nine lakhs. Okay. And we'll backers on expected monetary value for this is an alternative route that is going for M v M. Come is coming 4.45 Blacks okay on expected monetary value. Or, you know, others are coming. Let's say this is you know, it's coming 3.73 life. So, uh, expected monetary value approach or a spread Daisy is saying that OK, that the best be off is associated with M concourse. So by doing income is student can expect and every speck is off four point 45 blacks. Okay, how would other alternatives are not off the model? OK, are not optimal are as the best decisional donated is doing. I m going. Course According do you know this According do you know, expected monetary will approach. So this is how we make a decision under a discus situation. OK, 12. Expected Value of Perfect Information: Hello. Uh, everybody Indecision. I will be discussing about one related concept off. This isn't making under risk our fiscal situation. Concept off. Expected value are perfect information. Probably be estimates off. Students all from nature can be improved if one can gather information. Okay, so please note down this and, uh, the expected profit may also increase if one knows with identity, which has stayed off nature with Parker. Okay, so this is also important. Okay, Now, if the decision maker, please keep this in mind if the decision maker precisely more, we just stood often nature will occur. Then he or seek and fine. Uh, okay, what is score inspector? Valuable information. OK, if we know which is state will occur then as decision minutes maker, we will choose the highest payoff under that stood off nature. Okay, so please remember that if I know precisely die prospects off low jobs in a row, will aka Then I will choose. Okay, look at the table aid. Okay. If I precisely know that prospects off low jobs and Aereo prevail or exist, or we walker, then I will select. You know, I am gone. Course, because, uh, under this uh, you know, under this straight off nature are outcome the highest feel is associated with in Conchos. Okay, so please keep this in mind. Similarly, if I know precisely if prospects off medium job scenario exist, then I will also select, you know, income course. Okay, Because in case off this scenario, the highest be off associated with important course. Okay, you can see the be off associated with MBIA is for luck and be off. Associated with other school Says is 3.6 lot under, you know, prospects off medium jobs. And okay, now, similarly, if I precisely no, as a decision maker, that the prospects off high job scenario would occur, then I will go for M V equals because with them vehicles, the highest payoff is associate ID. Because in that scenario, I m gum is having a baobab. Six luck on other courses is having a b 07 So I will select the highest pay off associated with in me. Then I will find, you know, expected over Luke off these okay on that is given by you know, this formula. You can see that I have this part is you know, uh, So how you spiel? Under prospects off. Low job scenario is 3.5. I will select. Okay. And there is 50%. Probably that that particular scenario will Okay, Okay, Andi with the prospect. So for medium job scenario is 30% on the highest payoff is five lack. That is associated with M. Come on. There is 20% chance that you know that I s payoff. Is it? Luck on the expected value is coming. You know, when you find the specter of value off this that is coming for luck, it in fact okay, it fine on if you be that okay. Uh um, I just expected the monetary value off east. This is an alternative that waas 4.45 So this difference is called specter value or perfect information. Okay, so they expected value off perfecting commission for this particular example is coming 40,000. Okay, on what is the significance off this information? Suppose you don't know which course I should select then Suppose you are hiring, you know are taking some consulted. NC Okay, on you are spending less. A the suspected of hello. Perfect information says that maximum you suit you know Spain on. You know, this particular concern DNC, this type of consultancy, IHS 40,000. Okay, because at Maxtor, you know the hello off this information is for the frozen. Yeah, I suppose we were spending more than 40,000 on getting this kind of insolvency. Then that is, you know, beyond the expected value of perfect information. OK, so this is all about, you know, expected there, Lou off perfecting permission concept. Andi, this is how we make this season under, you know, risk situation or risk a situation. Okay. Thank 13. Decison making under risk Example using Excel: Hello. Indecision. I will show you how toe, uh do, uh, optimal decision making on the risk of situation using Emma's excel. Okay, Andi, I really consider one example. Let me go toe my excellence it. So this is the problem we are having in hand a decision maker faced with two. This is another natives. So here we have our This is an alternative one. And this is an alternative to on three of states off nature. Okay, so straight off nature one. Ah, start off nature to and a street off. Native three on. Do you know that there's a 60% chance that state off nature one will prevail? There is 30% that s too will prevail on. There is a 20% chance that s three would okay on bizarre the pay off. You know, you can say sales related with this is an ultimately one when state one would occur on 560 when I stayed to leper on 750 when district three. So similarly, uh, this is an alternative. Do on. We have, you know, payoff associated with first district off nature. These 6 50 then suck industry it off nature the office to do associative these 5 400 being and finally, uh, you know, 650 with this is an alternative to in a state three. Now the question is given. Use their specter. Will you approach to get reminder off demon decision in this case. So obviously we have to find the expected value off easy. This is an alternative on this is how you can find out. Okay, you know that. You know. So I will. I will write the formula here. Okay? So you can see that the off is first the office 600. So I'm finding Inspector. I look for this isn't ultimately one. This is human like this and I'm going to multiplies little 16 plus, you know, second be obvious. 5 60 money replied. But you know, a strict sign is used for my application in excess. Please remember, on quiet three with Andi similarly, you know, that would be office 750. Be glad, but zero point. So basically we are finding here over the score. Ah, worded average or respected man is coming. 670. This is the inspector monetary value associated with this is an alternative. What? Okay, then similarly, we will find out. So you can also nor the formula here on. We have guard the expected monetary value by this Permal. Similarly four decision are permitted to I will try and respected well or be toe similarly , you know, multiplied by gentle Juan. Thanks. Plus 4 58 What a life. But 0.3 last six b like by zero point on the expected. Wanted to have a look off. Second, this is an eternity. He's 600 57.4. So according Toa expected monetary value approach, the optimally season is D one. So that decision maker has toe, you know, Jews be one alternative, okay, to maximize, you know, sales. Because the expected sales is higher associated with. This is an underneath. Now, you know that to find a specter value off perfect information. Okay, What we have to do, we have to find out. You know, the specter that blew off each are this is an alternative, Okay? Associated with you know how USP off that each straight off nature. Now, if I'm so that state one upper, then I will select. You know, uh, the you know. Highest be off. Associate did in this case is, you know, 6 50 That is Do OK, So I will ride this Pamela. Like this. Okay, Uh, 6 50 multiplied by gentle wine. Sick. Okay, if I'm If I know precisely that state you will occur. Then I will take the season a litter native. Our I will select. This isn't definitely one. Okay, Onda, the highest free off associated with this is an alternative. One is 560 I wondered. 60 Marty like my little one. Plus, if I know recited Lee that a state three will would aka then the highest playoff associated with ST three ease. You know, that is 750. So I will. Right here. 700 multiplied. 0.2. So there specter value in in case off. Perfect information is coming. 700. It on expected. Very Lou. All perfect information. E b B. I is given by, you know, 700. It 708. Let me ride the 708 minus, you know, highest be off. Associated with east. It's an alternative that 600 70. So it is coming turkey. Okay, So a specter value of perfect information or this particular problem is coming. Okay, so this may be relax our 30 millions or 30 crores, depending on the unit off. You know, this is invariable. So this is how you can use a mess Excel for, you know, taking this is and making under a risky situation. Using some small Pamela, you can easily work out. You know, this isn't making under discuss situation. Okay. Thank 14. Decision tree: Hello, everybody. Indecision. I will be discussing about one concept or this isn't analysis Decision Recover. What is the decision? Three. I've soft nodes, namely Bob Step nor on certain type. No branches off. This is entry on. Finally, this isn't re analysis using and example. So little system. This isn't three is a sequential. Represent patient off mighty stays. This isn't a problem. Okay? In the decision making process, the decision maker has to take into account number off alternatives. Uncertainties Associate ID with those. This is an alternative. So please keep this mine. That decision maker has to take into account number off the natives on uncertain it is or probably be associating with this decision. Alternatives. This isn't maker. Analyzing the alternatives has to identify the time sequence in which various excess and events follow. So please give this in mind Each different strip busy, involved, different feel this type off analytical process when displayed by graph in the form office three and branches, then it is scored. This isn't okay, so please give this in mind the meaning off Mrs Entry Flight. So not down the definition off. Mrs. Entry it This isn't we is a graphical display used for representing sequence seal Modesti's . This isn't a problem. Okay? Yes. On his decision, we has two types off. Nords, please. No do tapes off, Norm. Why they Squire or square or box? Time nodes refers to decision under mating. Okay, so please, no, I don't. And round or circle nodes represent the outcome or chance. Okay, so this is the meaning off, you know, types off north. Used in this is entry analysis the branch or resonating from each circle. Nor please remember this branch or resonating from East Circle Nord represent the different outcomes. Okay, We present the different outcomes and the branch or resonating from each square Nord our box type, nor represent the different bases and alternatives. So please keep this in mind. Okay? At the end, off each branch off a decision. Three are the Okay, So this is the meaning all you know this isn't it. Now we will consider one example. I'm having one example with me relating. Do you know how toe make this is in with the help off? This isn't free. So consider this example. Omega Brew has to decide whether to say the consulting form in daily or partner. Similar portions one can face. Let's say a portion sitting in us whether to say that being let let's a consulting form in Los ing done. I wasn't done or sickle. So very similar kind of problem setting up consulting form in Billy. We cost the company rupees 50. So please don't this information. So setting up the consulting form in Delhi, you know, we've got stripped it out 50 laps. However, if it saves company in, but now it will cost Onley Rubies. 25 blacks. Oh, my God. Group conducted a cost profit analysis which reveals the frying estimates over the next five years. So what kind of business? These two, you know, conserving form will generate income. Okay, Andi, these are the alternatives if there is high demand for services. Okay, then, uh, on there are three probabilities are okay associated with these three scenario that resulted in this is that there is creepy percent chance that there will be high demand for services. There is technique percent chance that there will be moderate demand for services on. There is 20% chance that they will be loading on for services provided by this consulting for. Okay, so there are three scenarios, Andi probably off each state's off nature. Okay, are given also. Now you see the off associated with each. This is another donor sitting up consulting from in Delhi with high demand. Okay, Well killed an animal profit off with 80 lacks sitting up and serving form in Delhi with moderate demand. Will give you know when relax. Okay, well given and will profit off to relax on saving of consulting form in daily with low demon will given animal profit off trapeze it looks now similarly setting up conserving form in partner with high demand will kill an animal profit off 25 blacks only saving up consulting form in but now with medium demand will given and will profit off. These 18 lacks. Okay, Andi setting up consulting form in partner with low demand where ill in and we'll profit off these 20 Lex. So thesis information okay, are thes Things can be represented with the help off it. This isn't very also okay, Andi, I will show you that this isn't dreams. This is The information is given like this. Ok, so sit up consulting form in Delhi. Okay, so with ah, high demand the payoff, you know. So this is, you know, this is the north. Okay to notice we are having here. So this is second. No, this is a square north you can see on, uh, the, you know, end off the brand stree or associated with one Be off. Okay, So setting up a consulting form in Delhi with high demand okay, will give a profit off a relax, OK. Similarly sitting up consulting form in Delhi with mortar demand will give you until lax on some. Literally. Okay, then. This is normal. One on this is no Do some lovely setting up. A consulting forming partner with high demand will give on animal proper doctor and defined blacks. So 25 blacks it didn't lacks 12 laps. They are associating with each decision. Okay, so now, uh, this is, uh And if we now, if we add the probabilities off each state off, nature on and be off associated with each outcome, or this is an under native, then this Iscar rolling out the three. So please. Okay. Meaning all rolling out rolling out that tree. If we add the probabilities off each estate off nature and pay off associated with east. This is an alternative. Are outcome, then this is car rolling out. Now, in order to compute the value off the decision, we will roll out the three on the specter. Well off nor too okay is given, as expected, monetary value off nor to is given the off associated with each other. This is an ultimatum on respective probability. So the expected value associated with Second, nor is going 47.6 legs. Okay, on some lovely you find the specter value off expected monetary value off north three. That is coming two nd three wind 20 point to relax. So on the basis off expected monetary I Lou approach the No Omega through is advised on the business off evolve analysis to save consulting form in New Delhi. Okay, so sitting up and selling from and normally will give you more profit. Okay, so this is all about you know, this isn't three analysis. Okay? Thank you.