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Optimization (MSS Mathematical Models (result var., decision var.,…
Optimization
MSS Mathematical Models
result var.
decision var.
uncontrollable var.
intermediate result var.
Decision Making
Certainty model
Risk analysis
Uncertainty
investment example
goal:
maximise the yield after one year :checkered_flag:
possible situations
solid growth
stagnation
inflation
decision table
payoff decision var.
Bonds
Stocks
CDs
uncontrollable var.
state of nature (economy)
solid growth
stagnation
inflation
result var.
treating uncertainty
optimistic approach
Maximax :star:
Pessimistic approach
Maximin :star:
treating risk
use known prob.
risk analysis:
expected value
:star:
Minimax regret approach :star:
MSS (Management Support System)
Prescriptive modeling
major modelling issue
problem identification
environment analysis
variable identification
forcasting
decide what to do and when
Categories
Optimisation
problem with few alternatives
find
best solution
via algorithm
find
best solution
via analytic formula
find
best solution
Simulation
find
good enough
solution
Heuristics
find
good enough
solution
Predictive and other models
Optimization via mathematics programming
Optimal solution
Linear programming (LP)