DECISION ANALYSIS OF A NEW DEPARTMENT IN A UNIVERSITY

DECISION ANALYSIS: It is a technique which is used to determine different outcomes of a simple business for the future events.This is basically a probability theory and we divide the situation into different events for example S1=recession S2=boom H1=inflation H2=deflation This is a situation in which a business can be divided.Three major types of strategies used in the decision analysis are 1)Max Max strategy 2)Max Min strategy 3)Risk Neutral strategy

1)MAX MAX Strategy: If a business has 2 events expansion or contraction and lets say expected higher outcome for expansion is 20 with the probability 0.8 and the lower outcome is 10 with the probability 0.2 then we choose the higher value as the optimal value. 2)MAX MIN Strategy: In this we choose the maximum value of the minimum outcomes as the optimum value 3)Risk Neutral Strategy: In this we multiply the probability with the expected outcomes respectively and the highest calue is chosen as the optimum value.

In this diagram 2 events have been chosen with and without research with assuming same probabilities in both. we determine different income levels of students in order to start a new department in the university. We choose three different sizes of the department Small Medium Large Small: As the department is small it will target high income students more and there probability is going to be higher and the number of students are going to be less. Medium:

In this there will be an equal ratio of both income level students as its beneficial for both. Large: In this low income level students are more targeted and the no of students is obviously larger.

Now we apply three strategies on it. MAX MAX approach: The highest value is 20 with the probability of 0.9 20*0.9=18 Min Max approach: The minimum value is 8 in the no research.now assuming the probability to be 0.2 8*0.2=1.6 Risk Neutral approach: Now we multiple all the outcomes with their respective probabilities and the highest outcome will be our optimum value. 10*0.2=2 20*0.8=16 15*0.3=4.5 18*0.7=12,6 20*0.1=2 20*0.9=18 8*0.2=1.6 18*0.8=14.4 13*0.3=3.9 15*0.7=10.5 19*0.1=1.9 18*0.9=16.2

So the best outcome is 18.