Mathematical models

Use mathematical techniques to link decision variables, uncontrollable variables, parameters, and result variables together:

• Decision Variables have values that describe choices.

• Uncontrollable Variables have values that are outside the decision-maker’s control.

• Parameters are fixed factors (constants).

• Intermediate Result Variables are intermediate outcomes.

• Result Variables are outcomes dependent on chosen decision variables, uncontrollable variables, parameters and intermediate results.

Quantitative models

• Quantitative relationships.
• Variables involved in the model have numerical values.
• Outcomes are numerical.

“if the sales this year are $400,000 and they increase by 10% next year, the sales will be $440,000”

Nonquantitative models (qualitative models)

• Qualitative relationships.
• Variables involved in the model have qualitative values that are represented within the model by numerical values.
• Outcomes are qualitative / numerical.

“indicate your happiness with our product on a scale of 1 (very unhappy) to 5 (very happy). …”

Results (outcomes) = f(decision variables, uncontrollable variables, parameters, intermediate results)

Modeling with decision tables

A tabular representation of a decision.

wiki: http://en.wikipedia.org/wiki/Decision_table

Can model multiple criteria decisions

Features include:

• Decision variables (alternatives)
• Uncontrollable variables
• Result variables

Applies principles of certainty, uncertainty, and risk