Model Driven DSS Chapter 9
What is a Model?
• A mathematical representation that relates variables
• For solving a decision problem
• Convert the decision problem into a model
• There can be multiple solutions to a model
• Use math techniques solve the model
Types of models
• Explanatory model– Fitting the data to a model– May be used for forecasting
• Contemplative models– To do what-if type analysis– User Interaction centered
• Algebraic models– Goal seek and optimization
Model driven DSS
• Analytical capabilities; Can answer ‘what-if’ scenarios
• Can be used for deciding which path to take (Goal seek)
• Can be used to determine what inputs will get you the desired output (Solving)
Software packages
• Statistical modeling
• Forecasting software
• Spreadsheets
• Optimization software
• Financial modeling software
Forecasting tools
For more forecasting software visithttp://morris.wharton.upenn.edu/forecast/software.html
Electronic Spreadsheets
Known as DSS generators
For more productshttp://www.dssresources.com/spreadsheets/products.html
Optimization software
MATLAB® 7.2
Models for accounting and financials
• Break-even analysis – demo at dssresources.com
• Cost-benefit analysis
• Financial budgeting
• Return on investment
• Price determination
Decision Analysis Models
• Muti-attribute utility models– Given a set of alternatives how to choose the best– Consider attributes of alternatives– Try online software at dssresources.com
• Analytical Hierarchical Process– Comparing an alternative to another alternative on
each attribute– Assign a grade between 1 and 9 to record
preferences– Use eigen-values to come up with ranking
Diagrams
• Decision trees– Uses two types of nodes – Choice and chance nodes– Calculate expected payoffs for each branch in the tree
• Influence diagrams– Representation for decision situation– Variables and how they influence one another– Non-cyclical– Types of variables
• Decision (controllable) variable (rectangle)• Chance (uncontrollable) variable ( Circle)• Outcome variable (oval)
– Does not represent temporal events or actions– Develop an influence diagram for some personal decision
Forecasting
• Extrapolation – simple average
• Moving average
• Exponential smoothing (example)
• Regress and econometric models
Optimization models
• What input values will get me the maximal output value?
• Constraints may not be violated
• Linear programming
• Integer programming
• Solver example