This assignment has two components. The first component is designed to demonstrate your knowledge of the basic quantitative decision-making tools and techniques. In this part, you are required to formulate and/or solve several simple decision problems using Decision Making Analytics (DMA)/ approaches learnt in this course during weeks 1-3. The second component is designed to demonstrate your critical thinking and advanced learning to tackle real-world scenarios (that is non-textbook-type problems).
What you need
To be able to complete the first component of this assignment, you need to read/review the chapters /topics scheduled from week 1 to week 3, from the recommended textbook and lecture notes/slides. For the second component, consider all the topics covered in this course during those weeks, but use your critical thinking and advanced learning.
Assumption: do not make any assumption for Component A of the assignment.
This assignment will ensure an understanding of the fundamental concepts of decision analytics, such as decision making under risks, decision making under uncertainties, multi-criteria decision making, evidence-based decision making, sequential decision making by a decision tree, and resource allocation decisions. You should be able to interpret the solutions in real life by analysing the report generated. The extended question (Task 3) requires critical thinking and an independent study /literature search. This question is designed to help develop the skills needed to solve different and complex practical problems.
Component A: Demonstrating basic knowledge in DMA
Task 1: Decision Tree
Samuel Jackson, an employee of CXC Construction Company, claims to have injured his back due to a fall while repairing the roof at one of the Eastview apartment buildings. He filed a lawsuit against Matt Dermont, the owner of Eastview Apartments, asking for damages of $1,500,000. Samuel claims that the roof had rotten sections and that his fall could have been prevented if Mr Matt Dermont had told CXC Construction about the problem. Mr Matt notified his insurance company, Howard Insurance, of the lawsuit. Howard Insurance must defend Mr Matt and decide what action to take regarding the lawsuit.
Some depositions and a series of discussions took place between both sides. As a result, Samuel Jackson offered to accept a settlement of $750,000. Thus, one option is for Howard Ins. to pay Samuel $750,000 to settle the claim. Howard Ins. is also considering making Samuel a counteroffer of $400,000 in the hope that he will accept a lesser amount to avoid the time and cost of going to trial. Howard’s preliminary investigation shows that Samuel’s case is strong; Howard Ins. is concerned that Samuel may reject its counteroffer and request a jury trial. Howard’s lawyers spent some time exploring Samuel’s likely reaction if they make a counteroffer of $400,000.
The lawyers concluded that it is adequate to consider three possible outcomes to represent Samuel’s possible reaction to a counteroffer of $400,000:
1 Samuel will accept the counteroffer and the case will be closed;
2 Samuel will reject the counteroffer and elect to have a jury decide the settlement amount; or
3 Samuel will make a counteroffer to Howard Ins. of $600,000.
If Samuel does make a counteroffer, Howard Ins. decided that it will not make additional counteroffers. It (Howard Ins.) will either accept Samuel’s counteroffer of $600,000 or go to trial [NB: do not treat this as an equal probability of either accepting or going to trial]. If the case goes to a jury trial, Howard Ins. considers three outcomes possible:
1 The jury may reject Samuel’s claim and Howard Ins. will not be required to pay any damages;
2 The jury will find in favour of Samuel and award him $750,000 in damages; or
3 The jury will conclude that Samuel has a strong case and award him the full amount of $1,500,000.
Key considerations as Howard Ins. develops its strategy for disposing of the case are the probabilities associated with Samuel’s response to Howard Ins’s counteroffer of $400,000 and the probabilities associated with the three possible trial outcomes. Howard’s lawyers believe that the probability that Samuel will accept a counteroffer of $400,000 is 0.10, the probability that Samuel will reject a counteroffer of $400,000 is 0.40, and the probability that Samuel will, himself, make a counteroffer to Howard Ins of $600,000 is 0.50. If the case goes to court, they believe that the probability that the jury will award Samuel damages of $1,500,000 is 0.30, the probability that the jury will award Samuel damages of $750,000 is 0.50, and the probability that the jury will award Samuel nothing is 0.20.
Now, perform an analysis of the problem facing Howard Insurance and prepare a report that summarises your findings and recommendations. Be sure to include the following items:
a A decision tree
b A recommendation regarding whether Howard Ins. should accept Samuel’s initial offer to settle the claim for $750,000
c A decision strategy that Howard Ins. should follow if they decide to make Samuel a counteroffer of $400,000
Task 2: SMART
Traditionally, Danaos Corporation has been utilising its site office in Karabar for its official purposes. This company has acquired ample land for their office. However, the Queanbeyan & Palerang Regional Council (QPRC) has approached the CEO of Danaos Corporation and asked him whether Danaos would be interested in a different site in Queanbeyan, as the Council would like to reacquire the Karabar site for a Council development. The QPRC has offered four further possible sites: Queanbeyan, Bungendore Drive, Isabella Street or Jerabomberra. The rates, power and maintenance per annum involved for each site are:
The benefits that the CEO believes should be taken into consideration are: Closeness to Customers, Size of Site, Car-parking Facilities, Visibility, and Working Environment. The CEO is able to rank the different benefits based on his experience:
Closeness to Customers
Size of Site
The CEO decides that the values of the benefits for the different sites are:
Closeness to Customers
Size of Site
a From the Cost versus Benefits chart (or the efficient frontier), should Danaos Corporation’s CEO accept the Council offer and choose a different site, or should Danaos keep the Site at Karabar?
b If Danaos accepts the offer from the Council, which Site should Danaos choose? Explain the choice.
c Execute “Sensitivity Analyses” to observe how changing the weights of different attributes can influence the preferred decision. Consider at least three attributes to perform the sensitivity analyses [i.e. three separate attributes for three separate sensitivity analyses. You will have three sensitivity analysis graphs for this].
Component B: Demonstrating Critical Thinking in DMA
Task 3: Quantitative Decision Analytics
All topics covered in Weeks 1-3 will support you with this assessment.
In this task, you need to write a report describing a decision problem that you believe could be addressed by using a Decision Analytics technique (demonstrated between weeks 1-3) to improve the situation. A few guidelines can be-
◦ Explain how you identified the problem and justify why you think you have identified it correctly.
◦ Describe the background of the problem and the reason for its selection.
◦ Describe the limitations and assumptions that may need to be considered.
◦ You may also discuss the current practice and the existing difficulties.
◦ You are advised to give the reasons for the chosen decision-making tool/technique, the advantages & disadvantages, resources required, and the computational time required.
◦ Analyse the results and provide sensitivity analysis, if any.
◦ Describe your computational difficulties and experiences. You may also mention the things you wanted to do but could not do due to time or other constraints.
◦ Ensure that the topic and/or associated material is not/cannot be security classified.
You are encouraged to add anything that you find relevant to the assignment. Notably, you need to solve your problem by using only one decision making tool/technique (e.g., decision making under uncertainty tool, decision making under risk tool, MCDM approach).
A Few Decision Making Problems related to Quantitative Decision Analytics
A few possible examples of decision problems could be:
i Considering an MCDM technique to provide recommendations on the most suitable renewable energy sources for investment;
ii Finding the most suitable renting property after considering a few relevant attributes and then solving that by using an MCDM technique;
iii Identifying the proper chatbots to replace a current job by using an MCDM technique;
iv Developing a Decision Tree to demonstrate sequential decision making under uncertainties;
v Selecting a supplier under current COVID-19 prone business policy (with uncertainties);
vi deciding on the proper end-of-life vehicle’s recycling facility in Sydney by applying MCDM technique or any other quantitative technique.
This is a non-exhaustive list and you must select your problem based on your professional experience, real-life contexts or literature search.
Prepare a brief assignment report for Tasks 1- 3. For Tasks 1-2, prepare a brief report explaining your solutions. The report should be succinctly presented within 3000 words (approximately 1000 words for Tasks 1 – 2, and 1800 words for Task 3), plus any accompanying spreadsheets. All sources of material must be quoted, and graphs and tables should be labelled appropriately. As a convention, “Word count includes everything in the main body of the text (including headings, citations, quotes, lists, etc). The list of references, tables, appendices and footnotes are NOT included. Regarding Task 3, similar problems may not appear in the literature; however, you will find that the techniques you may consider appear in other problem areas.
Your report should be written using correct spelling, grammar and punctuation. Language should be free of bias (including but not limited to race, gender, sexual orientation or disability). Harvard referencing is required.