University of Cape Town

Department of Statistical Sciences

Masters in Data Science

Coursework Module STA5074Z

Decision Modelling for Prescriptive Analytics

2017
Final Examination, November 2017

Internal Examiners: Assoc Prof L. Scott, Dr J. Nyirenda

External Examiner: Prof T. de Wet Time: 3 hours
Pages: 4
Full Marks: 100

ANSWER ALL FOUR QUESTIONS

SECTION A

QUESTION 1 [50]
The following questions refer to Ferretti, V. (2016). From stakeholder analysis to cognitive
mapping and Multi-Attribute Value Theory: An integrated approach for policy support,
European Journal of Operational Research, 253, 524-541.

(a) Discuss the use of Cognitive Mapping in this paper. In particular, comment on the
degree to which you think this reflects causality. (6)

(b) The paper makes reference to framing bias and confirmation bias. Explain what
cognitive biases are and refer to two other cognitive biases that can affect our
attempts at rational decision making. (10)

(c) The paper makes use of the bisection method to set up marginal value functions.
Mention one other approach that could have been used (explain briefly how this
method works) and explain why it is necessary to construct these value functions,
especially with reference to criteria for which a measurable scale exists. (12)

(d) Explain how the author verifies the underlying assumptions of the value function
model employed. (10)

(e) In Table 4, there are no dominant (or dominated) alternatives. In Table 6, alternative
4 is clearly dominant. Explain. (6)

(f) The abstract refers to the combined and synergistic effect of the three tools used in
this paper. Briefly outline what these combined and synergistic effects are. (6)

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 SECTION B

QUESTION 1 [12]
A manufacturer is required to produce an alloy consisting of 45% lead, 35% zinc and 20% tin.
This has to be achieved by blending a number of other alloys. The available alloys and their
compositions and prices are shown in the table below. Note that one of the available alloys
(E) satisfies their requirements, but is also the most expensive on the market, which is why
blending may be advantageous. It is intended to use linear programming to assist the
manufacturer in identifying the lowest cost blend which would satisfy the requirements.
Note, however, that due to limited availability of some alloys, there are upper limits on the
proportions of some of the alloys that can be used in the blend (shown in row 7 of the table
below)

Row Desired
No. Alloy A B C D E F G H I Blend
1 % Lead 10 10 40 60 45 30 30 50 20 45
2 % Zinc 10 30 50 30 35 40 20 40 30 35
3 % Tin 80 60 10 10 20 30 50 10 50 20
4 Rand per Kg 41 43 58 60 80 75 73 69 73
5
6 Kg used per Kg product 0.0 0.0 0.0 0.0 1.0 0.0 0.0 0.0 0.0 1
7 Maximum available 0.5 0.3 1.0 0.3 1.0 1.0 1.0 1.0 1.0
8
9 Total used 1.0 Total cost per Kg: 80.0
10 Blend achieved
11 % Lead 45
12 % Zinc 35
13 % Tin 20

The problem above was solved using Excel Solver and the following sensitivity report was
produced. The report also indicates the values of the variables in the optimal solution.

Adjustable Cells

Final Reduced Objective Allowable Allowable

Cell Name Value Cost Coefficient Increase Decrease
$C$7 Kg used per Kg product A 0,14 0,00 41,00 9,20 1E+30
$D$7 Kg used per Kg product B 0,00 6,57 43,00 1E+30 6,57
$E$7 Kg used per Kg product C 0,23 0,00 58,00 5,75 59,00
$F$7 Kg used per Kg product D 0,30 -20,00 60,00 20 1E+30
$G$7 Kg used per Kg product E 0,00 14,21 80,00 1E+30 14,21
$H$7 Kg used per Kg product F 0,00 23,43 75,00 1E+30 23,43
$I$7 Kg used per Kg product G 0,00 16,86 73,00 1E+30 16,86
$J$7 Kg used per Kg product H 0,33 0,00 69,00 15,31 7,67
$K$7 Kg used per Kg product I 0,00 27,86 73,00 1E+30 27,86

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Constraints
Final Shadow Constraint Allowable Allowable
Cell Name Value Price R.H. Side Increase Decrease
$M$2 % Lead 45,00 1,22 45,00 5,16 5,90
$M$3 % Zinc 35,00 0,12 35,00 7,42 4,10
$M$4 % Tin 20,00 0,35 20,00 27,78 11,11

Examine this report and answer the following questions:

(a) If it were possible to obtain more of alloys B and D, to increase the proportions of
these to more than 0.3, how much would it be worth paying per kilogram to obtain
the extra? (2)
(b) At what price would it be optimal to use alloy G in the blend? (2)
(c) Of course, the blending itself will cost money, and thus the saving in blending costs
should be credited to the use of alloy E (which does not need blending). On this
basis, what is the maximum blending cost for which the LP solution obtained as
above will be optimal? (4)
(d) If it were possible to negotiate a modified desired blend, what alterations would you
seek? What cost savings might that generate? (4)

QUESTION 2 [23]
A small town operates a steam turbine plant to produce some of its own electricity. The
plant can burn three different types of coal that differ in terms of heat produced,
atmospheric sulphur emissions and coal dust emissions. There are legal requirements that
sulphur emissions be limited to 2500 parts per million (ppm), and coal dust emissions to
2.8 kg per ton of coal. In interests of the local environment, however, the town council may
wish to reduce sulphur emissions and coal dust below the legally required levels. Properties
of the three coal types are given in the following table.

Sulphur Coal Dust Kgs Steam

Coal Type Emission (ppm) (kg/ton) Per ton coal
1 1100 2.2 12000
2 3500 3.2 18000
3 1300 1.8 14000

The task is to determine the proportions of each type of coal to be included as feed to the
turbine. (It is assumed that a constant blend can be maintained, so that if the proportions
are 0.35, 0.4 and 0.25 respectively, then for example emissions can be viewed as being at a
constant level of (0.35 x 1100 + 0.4 x3500 + 0.25 x1300 = 2110.) The objectives are then to:

• Maximize steam produced per ton of feed (z1);

• Minimize sulphur emissions (z2);
• Minimize coal dust (z3).

(a) Formulate this problem in multiple objective linear programming terms. (7)
(b) An analyst has used LP to construct the following payoff table: (1)

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 Objective Optimised
Value for Z1 Z2 Z3
Z1 16182 2500 2.56
Z2 12000 1100 2.20
Z3 14000 1300 1.80

Explain how the analyst would have obtained the above table.
(c) Suppose now that the following goals have been specified for the three objectives:
15000kg steam per ton, 1800 ppm sulphur emissions, and 2.25 kg coal dust per ton.
Suppose further that the decision maker has stated that the relative importance of
the ranges of values in the payoff table are 10:8:5 respectively. Formulate a
Chebychev goal programming model for this problem. (15)

QUESTION 3 [15]
Various methods of risk analysis are available, including best-case/worst-case analysis,
what-if analysis, and simulation. Of these three methods, simulation is the only technique
that provides hard evidence (facts and figures) that can be used objectively in making
decision. Discuss.