SKEDSOFT

Operations Research

Introduction:

In operation research decision theory is also the part of gaming theory which is depend over the certainty of any model.In management literature, we have several quantitative decision models that help managers identify optima or best courses of action.

Decision theory:

  •  The decisions are classified in two ways  according to the degree of certainty
  •   deterministic models, where the manager assumes complete certainty and each strategy results in a unique payoff,
  •   Probabilisticmodels, where each strategy leads to more than one payoffs and the manager attaches a probability measure to these payoffs.
  •   The scale of assumed certainty can range from complete certainty to complete uncertainty hence one can think of decision making under certainty (DMUC) and decision making under uncertainty (DMUU) on the two extreme points on a scale.
  •   The region that falls between these extreme points corresponds to the concept of probabilistic models, and referred as decision-making under risk (DMUR).
  •   Decision theory deals with decision making under conditions of risk and uncertainty.
  •   In management literature, we have several quantitative decision models that help managers identify optima or best courses of action.

Decision (definition):

  • “A decision is the conclusion of a process designed to weigh the relative utilities or merits of a set of available alternatives so that the most preferred course of action can be selected for implementation.”
  •   Decision-making involves all that is necessary to identify the most preferred choice to satisfy the desired goal or objective. decision-making process must involve a set of goals or objectives, a system of priorities, methods of enumerating the alternative courses of feasible and viable courses and a system of identifying the most favourable alternative.
  • One must remember that the decisions are sequential in nature.

Necessity of decision:

  •   In management theory the essence of management is to make decisions that commit resources in the pursuit of organizational objectives.
  • Resources are limited and wants and needs of human beings are unlimited and diversified and each wants to satisfy his needs in an atmosphere, where resources are limited.

Decision and conflict:

  • When a group of people is working together in an organization, due to individual behaviour and mentality, there exists a conflict between two individuals.
  • Not only that in an organization, each department has  its own objective, which is subordinate to organizational goal, and in fulfilling departmental goals, there  a conflict between the departments.
  • any decision maker has to take all these factors into consideration, while dealing with a decision process, so that the effect of conflicts between departments or between subordinate goals is kept at minimum in the interest of achieving the overall objective of the organization.

Phases of decision making:

  •   The decision theory has assumed an important position, because of contribution of such diverse disciplines as philosophy, economics, psychology, sociology, statistics, political science and operations research to the area decision theory.
  •   In decision-making process we recognize two phases:

(1)How to formulate goals and objectives, enumerate environmental constraints, identify alternative strategies and project relevant payoffs.

(2)Concentration on the question of how to choose the optimal strategy when we are given a set of objectives, strategies, payoffs. We concentrate more on the second aspect in our discussion.