Module 8: Decision Problems and Solutions
Course Contents:
Decisions under certainty:
Uniform objective: Basic theory of producer and consumer decisions, Investment decisions, Profiles of benefits and costs, discounting, Net present value, internal rate of return, annuity, Integrated decisions on investment and production programs, Cost-benefit analysis
Multiple objectives: Decision matrix, Ordinal and cardinal scaling, Cardinal solution methods, Sensitivity analysis, ELECTRE, AHP, Systems approach
Decisions under risk and uncertainty: Treatment of risk, Probabilities and state of nature, Bernoulli-principle, Certainty equivalent, Expected value and standard deviation, Role of risk aversion
Uncertainty: Maximin and minimax, Laplace rule, Staged decisions, Scenario construction,
Decisions with many decision units: Partners and competitors, Voting mechanisms