Page 26 - DCAP208_Management Support Systems

Unit 2: Decision Support

Notes
Figure 2.1: Decision Matrix

Source: http://worldacademyonline.com/article/18/1/managerial_decision_making.html
Mathematically this relationship can be expressed as:
Oij = f(Di, Sj)
Developing a graphical display is an effective way of mapping the alternatives and probable
events that can occur in a complex decision-making environment. Decision trees use symbols
consisting of squares and circles. Branches of the decision tree that extend from a square depict
an area where several choices can be made while a circle connotes a unique state of nature
having certain outcomes.

A decision tree is analyzed in reverse order from right to left going back chronologically.
Decision trees are normally accompanied by a payoff or decision table where all the alternatives
are listed down the left side of the table with states of nature listed across the top of the table and
payoffs stated in the main part of the table.

Example: The Jackson Lawn Products Corporation is studying the possibility of
manufacturing a new line of lawn mowers. Since the market for the new mowers is uncertain,
the corporation must decide whether to construct a large or small plant, or do nothing. Figure
2.2 presents a decision tree depicting the Jackson Lawn Products decision choices.

Figure 2.2: Jackson Lawn Products Corporation Decision Tree

State of Nature Nodes Strong Market

Decision Node 1 Weak Market
Build Large Plant Strong Market

Build Small Plant 2

Weak Market

Build No Plant

Source: http://worldacademyonline.com/article/18/1/managerial_decision_making.html
Payoff or decision table can be developed to assist Jackson Lawn Products in determining what
type of a lawn mower plant they should build. There is an outcome for each decision and state

LOVELY PROFESSIONAL UNIVERSITY 19