Quantitative Analysis for Management, 13/e

Module 3 Decision Theory and the Normal Distribution

Learning Objectives

After completing this module, students will be able to:

1. M3.1 Understand how the normal curve can be used in performing break-even analysis.

2. M3.2 Compute the expected value of perfect information using the normal curve.

In Chapter 3 of your book, we looked at examples that deal with only a small number of states of nature and decision alternatives. But what if there were 50, 100, or even thousands of states and/or alternatives? If you used a decision tree or decision table, solving the problem would be virtually impossible. This module shows how decision theory can be extended to handle problems of such magnitude.

The normal distribution can be used when there are ...