Management Science: The Art of Modeling with Spreadsheets, Third Edition

Chapter 7. Data Analysis for Modeling

INTRODUCTION

In this chapter, we discuss the roles that data, data analysis, and statistics play in modeling, and we present a variety of relevant Excel tools. Data analysis and statistical techniques are used in many situations, not all of which are pertinent to the building of spreadsheet models for decision making. Since that is our focus in this book, we organize this chapter around tools that are most useful in the modeling context.

We emphasize that modeling is motivated by the existence of a problem to be resolved or a decision to be made. In the course of developing and testing a model for the purpose of shedding light on the problem, we may decide to collect empirical data to help determine either the value of a parameter or the structure of a relationship. However, the collection and analysis of that data is a means to an end, not a primary goal. Data analysis should be undertaken to improve the accuracy and usefulness of the conclusions drawn from the model, not to enhance the model for its own sake. In that sense, data analysis supports the modeling process, but modeling remains the primary focus.

Data analysis and statistical techniques are often used in contexts other than in modeling. Data analysis, for example, is often used to provide general background for managers. A marketing manager might ask for a report on company sales by geographic region and by product line — not to help make a specific decision, but simply to better understand ...