THEORY OF DECISION

Delivered by:

WILMER JOHAN RINCON ESTUPIÑAN

HECTOR CAMILO LOZANO

JULIAN ERNESTO RODRIGUEZ

CARLOS HUMBERTO RINCON BARAJAS

Presented to:
RICARDO JAVIER PINEDA

GROUP:
212066_54

NATIONAL UNIVERSITY OPEN AND REMOTE

SCHOOL OF BASIC SCIENCES, TECHNOLOGY AND ENGINEERING
INDUSTRIAL ENGINEER
UNAD
 INTRODUCTION

In the development of this topic, the criterion is determined according to the

orientation of the problem to be analyzed, when the objective is oriented to receive
benefits, the highest values are chosen, and when the objective is aimed at
reducing costs, the lower values. This determines the deviation of the result.

Based on this we can find a series of exercises that test as future syllains
Industrials to find solution to these in a critical and comprehensive way of each of the
topics used in the guide presented by the tutor. In this way employ these solutions
with everyday problems.
 Exercise 1. Laplace, Wald or pessimistic, optimistic, Hurwicz and
Savage criteria (Profit Matrix):
In the company ABC several alternatives are presented to choose the best
technology of four possible, whose performance depends on the adaptation of the
workers who will manipulate the equipments that comprise it. The expected
benefits of each alternative and degree of adaptation of the workers are given in
the table, in millions of pesos ($). For Hurwicz please assume an alpha of 0,7.

According to Table 1 by applying the criteria of Laplace, Wald or pessimistic,

optimistic criteria, Hurwicz and Savage determine the optimal decision level
according to the benefit criteria.

DEVELOPING:

 Criteria of Laplace: This system is based on the principle of insufficient

reason, since we can not assume the greater probability of occurrence to
one future event than another, we can consider that all events are
equiprobable.

DEVELOPING:
𝑛
1
𝑉𝐸 = ∑ 𝐺𝑖𝑗
𝑛 𝑗=1

p(j) 1/5 1/5 1/5 1/5 1/5 V/M

Alternative Does not its ts Fits well Fits very
fit acceptabl successful well
Technolog 2118 2168 2213 2265 2330 2218,8
y1
Technolog 2109 2158 2245 2252 2328 2218,4
y2
Technolog 2145 2177 2232 2256 2303 2222,6
y3
Technolog 2130 2166 2206 2255 2322 2215,8
y4
Technolog 2128 2165 2213 2275 2335 2223,2
y5

REPLY: The best option according to the Laplace criterion is technology 5

because it has the highest expected value (2223.2).
  Wald or pessimistic: It is the conservative criterion, in this type the
minimum value of each one of the states is sought and in the end the
highest one is chosen, since the philosophy of this exercise is the best of
the worst, the option chosen could not be the most optimum.

DEVELOPING:

𝑉𝐸 = 𝑀𝑎𝑥(𝑀𝑖𝑛(𝑅𝑖𝑗))

Alternative Does not its ts Fits well Fits very

fit acceptabl successful well
Technolog 2118 2168 2213 2265 2330 2118
y1
Technolog 2109 2158 2245 2252 2328 2109
y2
Technolog 2145 2177 2232 2256 2303 2145
y3
Technolog 2130 2166 2206 2255 2322 2130
y4
Technolog 2128 2165 2213 2275 2335 2128
y5

REPLY: The minimum value between the states is sought and the maximum value
is chosen among the states, the best of the worst is chosen. In this exercise the
best adaptation of technology is sought when performing the analysis through the
information The best option according to the criterion of Wald or Pessimist is the
technology 3 for having the highest expected value (2145).

 Optimistic criteria: This criterion determines and selects the best of the
best, so that in the end the maximum value of each one of the states is
taken.

DEVELOPING:

𝑉𝐸 = 𝑀𝑎𝑥(𝑀𝑎𝑥(𝑅𝑖𝑗))

Alternative Does not its ts Fits well Fits very

fit acceptabl successful well
Technolog 2118 2168 2213 2265 2330 2330
y1
Technolog 2109 2158 2245 2252 2328 2328
y2
Technolog 2145 2177 2232 2256 2303 2303
y3
Technolog 2130 2166 2206 2255 2322 2322
y4
Technolog 2128 2165 2213 2275 2335 2335
y5
REPLY: The best option according to the optimistic criterion is technology 5
because it has the highest expected value (2335).

 Hurwicz: This criterion determines a series of attitudes from the most

pessimistic to the most optimistic, where α is a coefficient of pessimism of (1
- α), and the coefficient of optimism of α is between 0 and 1.
 DEVELOPING:

VE = 𝑀𝑎𝑥(𝑅𝑖𝑗) ∗∝́ + 𝑀𝑖𝑛(𝑅𝑖𝑗) ∗ (1 −∝́ )

According to alpha given by the problem we have to ∝= 0.7, we have to carry out
the relevant operations obtaining:

Alternative Does not its ts Fits well Fits very

fit acceptabl successful well
Technolog 2118 2168 2213 2265 2330 2266,4
y1
Technolog 2109 2158 2245 2252 2328 2262,3
y2
Technolog 2145 2177 2232 2256 2303 2255,6
y3
Technolog 2130 2166 2206 2255 2322 2264,4
y4
Technolog 2128 2165 2213 2275 2335 2272,9
y5

REPLY: The best option according to Hurwicz criteria is technology 5 because it

has the highest expected value (2272.9).

 Savage: This criterion transforms the matrix of results into a matrix of

errors, so that this form, the person making the decision can easily assess
the opportunity costs incurred by making a wrong decision, so you must
determine the best result for every situation that may arise.

DEVELOPING:

According to the conditions we choose the highest value to calculate the cost
matrix, obtaining:

Alternative Does not its ts Fits well Fits very

fit acceptabl successful well
Technolog 2118 2168 2213 2265 2330
y1
Technolog 2109 2158 2245 2252 2328
y2
Technolog 2145 2177 2232 2256 2303
y3
Technolog 2130 2166 2206 2255 2322
y4
Technolog 2128 2165 2213 2275 2335
y5

Alternativ Does not Fits Fits Fits Fits very

e fit acceptably successfully well well
Technolog 27 9 32 10 5 32
y1
Technolog 36 19 0 23 7 36
y2
Technolog 0 0 13 19 32 32
 y3
Technolog 15 11 39 20 13 39
y4
Technolog 17 12 32 0 0 32
y5

REPLY: Therefore we could implement in our company the technology 1,3 or 5

Exercise 2. Criteria of Laplace, Wald or pessimistic, optimistic, Hurwicz and
Savage (Cost matrix):

A warehouse of finished products that leases its services to imports from the USA,
must plan its level of supply to satisfy the demand of its customers in the day of
love and friendship. The exact number of crates is not known, but is expected to
fall into one of five categories: 610, 630, 680, 715 and 730 crates. There are
therefore four levels of supply. The deviation from the number of hoppers is
expected to result in additional costs, either due to excessive supplies or because
demand can not be met. The table below shows the costs in hundreds of dollars
(US $). For Hurwicz please assume an alpha of 0,75.

DEVELOPING:

 Criteria of Laplace: This system is based on the principle of insufficient

reason, since we can not assume the greater probability of occurrence to
one future event than another, we can consider that all events are
equiprobable.

DEVELOPING:
𝑛
1
𝑉𝐸 = ∑ 𝐺𝑖𝑗
𝑛 𝑗=1
p(j) 1/5 1/5 1/5 1/5 1/5 V/M
Alternativ e1 (610) e2 (630) e3 (680) e4 e5 (730)
e (715)
e1 (610) 2109 2197 2236 2271 2332 2229
e2 (630) 2112 2152 2228 2281 2315 2217,6
e3 (680) 2137 2168 2240 2275 2317 2227,4
e4 (715) 2110 2176 2238 2286 2331 2228,2
e5 (730) 2136 2173 2243 2287 2329 2233,6

REPLY: The best option according to the Laplace criterion is technology 5

because it has the highest expected value (2233.6).
  Wald or pessimistic: It is the conservative criterion, in this type the
minimum value of each one of the states is sought and in the end the
highest one is chosen, since the philosophy of this exercise is the best of
the worst, the option chosen could not be the most optimum.

DEVELOPING:

𝑉𝐸 = 𝑀𝑎𝑥(𝑀𝑖𝑛(𝑅𝑖𝑗))

Alternativ e1 (610) e2 (630) e3 (680) e4 e5 (730)

e (715)
e1 (610) 2109 2197 2236 2271 2332 2109
e2 (630) 2112 2152 2228 2281 2315 2112
e3 (680) 2137 2168 2240 2275 2317 2137
e4 (715) 2110 2176 2238 2286 2331 2110
e5 (730) 2136 2173 2243 2287 2329 2136

REPLY: The minimum value between the states is sought and the maximum value
is chosen among the states, the best of the worst is chosen. In this exercise the
best adaptation of technology is sought when performing the analysis through the
information The best option according to the criterion of Wald or Pessimist is the
technology 3 for having the highest expected value (2137).

 Optimistic criteria: This criterion determines and selects the best of the
best, so that in the end the maximum value of each one of the states is
taken.

DEVELOPING:

𝑉𝐸 = 𝑀𝑎𝑥(𝑀𝑎𝑥(𝑅𝑖𝑗))

Alternativ e1 (610) e2 (630) e3 (680) e4 e5 (730)

e (715)
e1 (610) 2109 2197 2236 2271 2332 2332
e2 (630) 2112 2152 2228 2281 2315 2315
e3 (680) 2137 2168 2240 2275 2317 2317
e4 (715) 2110 2176 2238 2286 2331 2331
e5 (730) 2136 2173 2243 2287 2329 2329

REPLY: The best option according to the optimistic criterion is technology 1

because it has the highest expected value (2332).

 Hurwicz: This criterion determines a series of attitudes from the most

pessimistic to the most optimistic, where α is a coefficient of pessimism of (1
- α), and the coefficient of optimism of α is between 0 and 1.
 DEVELOPING:

VE = 𝑀𝑎𝑥(𝑅𝑖𝑗) ∗∝́ + 𝑀𝑖𝑛(𝑅𝑖𝑗) ∗ (1 −∝́ )

According to alpha given by the problem we have to ∝= 0.75, we have to carry out
the relevant operations obtaining:

Alternativ e1 (610) e2 (630) e3 (680) e4 e5 (730)

e (715)
e1 (610) 2109 2197 2236 2271 2332 2276,25
e2 (630) 2112 2152 2228 2281 2315 2264,25
e3 (680) 2137 2168 2240 2275 2317 2272
e4 (715) 2110 2176 2238 2286 2331 2275,75
e5 (730) 2136 2173 2243 2287 2329 2280,75

REPLY: The best option according to Hurwicz criteria is technology 5 because it

has the highest expected value (2280.75).

 Savage: This criterion transforms the matrix of results into a matrix of

errors, so that this form, the person making the decision can easily assess
the opportunity costs incurred by making a wrong decision, so you must
determine the best result for every situation that may arise.

DEVELOPING:

According to the conditions we choose the highest value to calculate the cost
matrix, obtaining:

Alternati e1 e2 e3 e4 e5
ve (610) (630) (680) (715) (730)
e1 (610) 2109 2197 2236 2271 2332
e2 (630) 2112 2152 2228 2281 2315
e3 (680) 2137 2168 2240 2275 2317
e4 (715) 2110 2176 2238 2286 2331
e5 (730) 2136 2173 2243 2287 2329

Alternativ e1 (610) e2 (630) e3 (680) e4 e5 (730)

e (715)
e1 (610) 28 0 7 16 0 28
e2 (630) 25 45 15 6 17 45
e3 (680) 0 29 3 12 15 29
e4 (715) 27 21 5 1 1 27
e5 (730) 1 24 0 0 3 24

REPLY: Therefore we could implement in our company the technology 5

Exercise 3. Criteria of Laplace, Wald or pessimistic, optimistic, Hurwicz and
Savage (Cost matrix):

A warehouse of finished products that leases its services to imports from the USA,
must plan its level of supply to satisfy the demand of its customers in the day of
love and friendship. The exact number of crates is not known, but is expected to
fall into one of five categories: 580, 720, 750, 790 and 830 crates. There are
therefore four levels of supply. The deviation from the number of hoppers is
expected to result in additional costs, either due to excessive supplies or because
demand can not be met. The table below shows the costs in hundreds of dollars
(US $). For Hurwicz please assume an alpha of 0,55.

DEVELOPING:

 Criteria of Laplace: This system is based on the principle of insufficient

reason, since we can not assume the greater probability of occurrence to
one future event than another, we can consider that all events are
equiprobable.

DEVELOPING:
𝑛
1
𝑉𝐸 = ∑ 𝐺𝑖𝑗
𝑛 𝑗=1

p(j) 1/5 1/5 1/5 1/5 1/5 V/M

Alternativ e1 (610) e2 (630) e3 (680) e4 e5 (730)
e (715)
e1 (610) 1147 1152 1238 1283 1311 1226,2
e2 (630) 1109 1193 1222 1298 1314 1227,2
e3 (680) 1106 1181 1245 1281 1346 1231,8
e4 (715) 1134 1177 1249 1276 1349 1237
e5 (730) 1149 1197 1248 1260 1328 1236,4

REPLY: The best option according to the Laplace criterion is technology 5

because it has the highest expected value (1236.4).
  Wald or pessimistic: It is the conservative criterion, in this type the
minimum value of each one of the states is sought and in the end the
highest one is chosen, since the philosophy of this exercise is the best of
the worst, the option chosen could not be the most optimum.

DEVELOPING:

𝑉𝐸 = 𝑀𝑎𝑥(𝑀𝑖𝑛(𝑅𝑖𝑗))

Alternativ e1 (610) e2 (630) e3 (680) e4 e5 (730)

e (715)
e1 (610) 1147 1152 1238 1283 1311 1147
e2 (630) 1109 1193 1222 1298 1314 1109
e3 (680) 1106 1181 1245 1281 1346 1106
e4 (715) 1134 1177 1249 1276 1349 1134
e5 (730) 1149 1197 1248 1260 1328 1149

REPLY: The minimum value between the states is sought and the maximum value
is chosen among the states, the best of the worst is chosen. In this exercise the
best adaptation of technology is sought when performing the analysis through the
information The best option according to the criterion of Wald or Pessimist is the
technology 5 for having the highest expected value (1149).

 Optimistic criteria: This criterion determines and selects the best of the
best, so that in the end the maximum value of each one of the states is
taken.

DEVELOPING:

𝑉𝐸 = 𝑀𝑎𝑥(𝑀𝑎𝑥(𝑅𝑖𝑗))

Alternativ e1 (610) e2 (630) e3 (680) e4 e5 (730)

e (715)
e1 (610) 1147 1152 1238 1283 1311 1311
e2 (630) 1109 1193 1222 1298 1314 1314
e3 (680) 1106 1181 1245 1281 1346 1346
e4 (715) 1134 1177 1249 1276 1349 1349
e5 (730) 1149 1197 1248 1260 1328 1328

REPLY: The best option according to the optimistic criterion is technology 4

because it has the highest expected value (1349).

 Hurwicz: This criterion determines a series of attitudes from the most

pessimistic to the most optimistic, where α is a coefficient of pessimism of (1
- α), and the coefficient of optimism of α is between 0 and 1.
 DEVELOPING:

VE = 𝑀𝑎𝑥(𝑅𝑖𝑗) ∗∝́ + 𝑀𝑖𝑛(𝑅𝑖𝑗) ∗ (1 −∝́ )

According to alpha given by the problem we have to ∝= 0.55, we have to carry out
the relevant operations obtaining:

Alternativ e1 (610) e2 (630) e3 (680) e4 e5 (730)

e (715)
e1 (610) 1147 1152 1238 1283 1311 1237,2
e2 (630) 1109 1193 1222 1298 1314 1221,75
e3 (680) 1106 1181 1245 1281 1346 1238
e4 (715) 1134 1177 1249 1276 1349 1252,25
e5 (730) 1149 1197 1248 1260 1328 1247,45

REPLY: The best option according to Hurwicz criteria is technology 4 because it

has the highest expected value (1252.25).

 Savage: This criterion transforms the matrix of results into a matrix of

errors, so that this form, the person making the decision can easily assess
the opportunity costs incurred by making a wrong decision, so you must
determine the best result for every situation that may arise.

DEVELOPING:

According to the conditions we choose the highest value to calculate the cost
matrix, obtaining:

Alternative e1 e2 e3 e4 e5
(610) (630) (680) (715) (730)
e1 (610) 1147 1152 1238 1283 1311
e2 (630) 1109 1193 1222 1298 1314
e3 (680) 1106 1181 1245 1281 1346
e4 (715) 1134 1177 1249 1276 1349
e5 (730) 1149 1197 1248 1260 1328

Alternativ e1 (610) e2 (630) e3 (680) e4 e5 (730)

e (715)
e1 (610) 2 45 11 15 38 45
e2 (630) 40 4 27 0 35 40
e3 (680) 43 16 4 17 3 43
e4 (715) 15 20 0 22 0 22
e5 (730) 0 0 1 38 21 38

REPLY: Therefore we could implement in our company the technology 5

 Exercise 4. Game Theory method:

To develop the exercise 4 to 5, it is necessary to consult the following reference:

Sharma, J. (2016). Operations Research : Theory and Applications. (pp. 383-391),
New Delhi: Laxmi Publications Pvt Ltd, v. Sixth edition. Available in the knowledge
environment of the course.

Graphical solutions are only applicable to games in which at least one of the
players has only two strategies. Consider the following 2 x n game:

Player 2
Strategy
A B C
I 27 33 38
Player
II 19 25 31
1

According to Table 4 find the value of the game by means of the graphical method
applied to matrices 2 x n or m x 2.

DEVELOPING:

Jugador
ESTRATEGIA 2
A B C MIN -
MAX
I 27 33 38 27
Player
II 19 25 31 22
1
MAX - 27 36 35
MIN

REPLY: According to the results obtained Maximin and Minimax give the same
result that is 27, for this reason the game comes to an end since it has the
same odds.

Exercise 5. Game Theory method:

Graphical solutions are only applicable to games in which at least one of the
players has only two strategies. Consider the following game m x 2:

Strategy A Player 2 B

I 27 3
Player 5
1 I 31 3
I 5
I 33 3
I 7

According to Table 5, find the value of the game by means of the graphical method
applied to matrices 2 x n or m x 2.
 DEVELOPING:

Q Q(2) SUM
(1 A
)
1 0 1

Player 2
Strate
A B MIN -
gy MAX
P(1) 0 I 2 35 35
Playe 7
P(2) 0 r1 II 3 35 31
1
P(3) 1 II 3 37 33
3
SUMA 1 MAX - MIN 33 37

VALOR
ESPERADO
27 VALOR 33 37
ESPERADO
31
33 MaxZ_V 33

REPLY: The maximum is determined per column and the minimum per row and
the minimax is obtained as well as the maximin, as the minimax is 31 and the
maximin
is 33 do not coincide, therefore there is no saddle point. There is no stable solution.

Exercise 6. Optimum solution of two-person games (Theory of games, mixed

strategies):

To develop the exercise 6, it is necessary to consult the following reference:

Sharma, J. (2016). Operations Research : Theory and Applications. (pp. 383-391),

New Delhi: Laxmi Publications Pvt Ltd, v. Sixth edition. Available in the knowledge
environment of the course.

The games represent the latest case of lack of information where intelligent
opponents are working in a conflicting environment. The result is that a very
conservative criterion is generally proposed to solve sets of two people and sum
zero, called minimax - maximin criterion. To determine a fair game, the minimax =
maximin, it is necessary to solve the stable strategy through the Solver.

PLAYER B
9
PLAYER A

8 8 8 8 1
1 3 1 0
8
8 8 8 8 2
4 3 6 6
8
8 7 8 8 4
2 8 6 9
 8
8 8 9 8 8
7 7 1 9
8
8 8 3 8 1
3 5 5 8

Solve the game of players A and B to determine the value of the game, using the
proposed Excel tool, according to the data in table 6.

DEVELOPING:
PLAYER
B
81 83 8 80 91 8
1 0
PLAYER A

84 83 8 86 82 8
6 2
82 78 8 89 84 7
6 8
87 87 9 89 88 8
1 7
83 85 3 88 81 3
5 5
87 87 9 89 91
1

REPLY: According to the results obtained Maximin and Minimax give the same
result that is 87, for this reason the game comes to an end since it has the
same odds.
 CONCLUSIONS

With the development of this topic on risk decision making, knowledge was
acquired based on a series of techniques, which allowed us to take an example,
which serves to be applied in the case that it is required to make decisions under
risk, we can apply this knowledge in the development of projects that are being
executed and also to determine the probabilities and opportunities to solve a
problem of economic type and order.
 BIBLIOGRAPHY

International Journal of Production Research. Retrieved from

http://bibliotecavirtual.unad.edu.co:2051/login.aspx?direct=true&db=buh&AN=1014
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Hillier, F., & Lieberman, G. (2010). Análisis de Decisiones. (pp. 634-725), México
D.F., México: Editorial McGraw-Hill. Recuperado de:
http://bibliotecavirtual.unad.edu.co:2053/book.aspx?i=386&opensearch=investi
gaci%C3%B3n%20de%20operaciones&editoriales=&edicion=&anio=%20