Static and Dynamic Models Treating Certainty,

5.3 Static and Dynamic Models

 Static Analysis – Single snapshot  Dynamic Analysis – Dynamic models – Evaluate scenarios that change over time – Are time dependent – Show trends and patterns over time – Extended static models Decision Support Systems and Intelligent Systems, Efraim Turban and Jay E. Aronson Copyright 1998, Prentice Hall, Upper Saddle River, NJ

5.4 Treating Certainty,

Uncertainty, and Risk  Certainty Models  Uncertainty  Risk Decision Support Systems and Intelligent Systems, Efraim Turban and Jay E. Aronson Copyright 1998, Prentice Hall, Upper Saddle River, NJ  Graphical representations of a model to assist in model design, development and understanding  Provide visual communication to the model builder or development team  Serve as a framework for expressing the MSS model relationships Rectangle = a decision variable Circle = uncontrollable or intermediate variable Oval = result outcome variable: intermediate or final Variables connected with arrows Example in Figure 5.1 Decision Support Systems and Intelligent Systems, Efraim Turban and Jay E. Aronson Copyright 1998, Prentice Hall, Upper Saddle River, NJ FIGURE 5.1 An Influence Diagram for the Profit Model. ~ Amount used in advertisement Profit Income Expense Unit Price Units Sold Unit Cost Fixed Cost Decision Support Systems and Intelligent Systems, Efraim Turban and Jay E. Aronson Copyright 1998, Prentice Hall, Upper Saddle River, NJ Spreadsheets  Electronic spreadsheet: most popular end-user modeling tool  Powerful financial, statistical, mathematical, logical, datetime, string functions  External add-in functions and solvers  Important for analysis, planning, modeling  Programmability macros Decision Support Systems and Intelligent Systems, Efraim Turban and Jay E. Aronson Copyright 1998, Prentice Hall, Upper Saddle River, NJ  What-if analysis  Goal seeking  Seamless integration  Microsoft Excel  Lotus 1-2-3  Figure 5.2: Simple loan calculation model static  Figure 5.3: Dynamic Decision Support Systems and Intelligent Systems, Efraim Turban and Jay E. Aronson Copyright 1998, Prentice Hall, Upper Saddle River, NJ of Few Alternatives Decision Tables and Trees  Single Goal Situations – Decision tables – Decision trees Decision Support Systems and Intelligent Systems, Efraim Turban and Jay E. Aronson Copyright 1998, Prentice Hall, Upper Saddle River, NJ Decision Tables  Investment Example  One goal: Maximize the yield after one year  Yield depends on the status of the economy  the state of nature – Solid growth – Stagnation – Inflation Decision Support Systems and Intelligent Systems, Efraim Turban and Jay E. Aronson Copyright 1998, Prentice Hall, Upper Saddle River, NJ

1. If there is solid growth in the economy, bonds will yield 12 percent;