Knowledge Content Library
Value of Imperfect Information in Excel without Decision Trees using SIPmath Simulation: A Case Study
Brian Putt, Retired Chevron
Imagine that you are the decision maker as we walk through a Value of Imperfect Information Analysis that considers uncertain demand curves (price vs quantity) to optimize your decisions and action plan. Reality is continuous (not discrete) and in this evaluation, we will illustrate how using simulation with SIPmath rather than the more traditional decision tree approach creates greater insights. Our dialogue will assume a reasonable understanding of the basics of VOI. Conditional probabilities matrices are still the core of any imperfect information analysis. We will consider questions like: Will the analysis be able to move you as a biased, risk averse decision maker to make a better decision by providing transparency? Will the graphics to include the distribution of the value of imperfect information provide the transparency that you the decision maker need to understand why this is the best decision policy and why it is better than other decision policies? We will demonstrate using Excel on-line graphics and optimization to show how SIPmath can engage decision makers, so they have commitment to action.
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Keywords: evaluation anamod, voi voivoc, strategy table strattab, decision tree dectree, influence diagram infldiag, simulation mcsim, modeling modtree