Decision Analysis for Management Judgment, 6th Edition

Suggested answers to selected questions

Chapter 2

3. She would choose Barbados. Several of the later options are cheaper, have a longer duration, and are closer to the beach.

Chapter 3

2. 1. Ultraword, Easywrite, and Super Quill are on the efficient frontier.
   2. Easywrite has the highest aggregate value of 82.5 (this value is obtained after normalizing the weights).
   3. This implies that the two attributes are not mutually preference independent, so the additive model may not reflect your preferences accurately.
3. 1. Design A will offer the highest aggregate value for benefits as long as the weight for environmental impact is below about 11. If the weight is higher than this, then Design C offers the highest-valued benefits.
   2. Designs A, C, and D are on the efficient frontier.
   3. The manager is prepared to pay $4000 for each extra benefit point (i.e., $120 000/30). A switch from Design D to Design A would cost only $731.7 for each extra benefit point (i.e., $30 000/41) and would therefore be worth making. However, a switch from Design A to Design C would cost $4705.8 per extra benefit point (i.e., $80 000/17) and would therefore not be worth making. Therefore, choose Design A.
4. 1. Rail/ferry has the highest value for aggregate benefits (i.e., 81).
   2. Rail/ferry and road/ferry lie on the efficient frontier.
   3. The manager is prepared to pay $1167 for each extra benefit point (i.e., $70 000/60). A switch from road/ferry to rail/ferry would cost $567 for each extra benefit point (i.e., $30 000/53) ...