QIT3023 Information Systems and Decision Making Mohd. Noor abdul hamid mohdnoor@uum.edu.

my 1 CHAPTER 7: MODELS IN DECISION SUPPORT SYSTEMS 7.1 DECISION MODELS: used to make a prediction what would happen in the real world if certain choices were made. Enable decision maker to evaluate each alternatives without trying them out 7.1.1 Model Types: Basic types of system models include: a) Graphical model eg: DFD, map b) Narrative model describe a system in a natural language c) Physical model smaller or idealized representation of the real system. d) Symbolic model / Information-Based model - represent reality by data - Types of data: i. True/False or Yes/No (Boolean Variables) ii. Character String iii. Numerical Value Which model often become a part of DSS?? models incorporate procedures and formulas to manipulate their data elements derive new data element values from values of other data elements in the model. Figure 1 : Family tree of Model Types Models

Descriptive (system) Prescriptive (process) Static Dynamic Static system Dynamic system Continuous Discrete-event QIT3023 Information Systems and Decision Making Mohd. Noor abdul hamid mohdnoor@uum.edu.my 2 A useful characteristic of most model the model remains valid when the data change 7.1.2 Model Types Used in DSS A DSS can incorporate several mathematical models : a. System vs Process Models : What are we modeling? system model models the system that we wish to study process model (prescriptive models) models the process that humans follow in making a decision about a system. process model can be normative or descriptive. b. Static vs Dynamic Models : Cause and effect over time Static Models: Dynamic models: Static models show the values that system attributes take when the system is in balance - ignore time-based variances Dynamic models follow the

changes overtime that result from system activities data values change over time. Passage of time does not play a part Involve less data easier to analyze & provide results more quickly Passage of time, with cause and effect relationships connecting one time period to the next, is essential to system behavior The variables used in the computations are averages A dynamic model constantly recomputes its equations as time changes Eg: A model that traffic flow in the intersection used to minimized delays by adjusting the signal timing To apply static model to dynamic system that system must be in equilibrium (in balance) steady state Dynamic models can only be

applied to dynamic system. QIT3023 Information Systems and Decision Making Mohd. Noor abdul hamid mohdnoor@uum.edu.my 3 c. Continuous vs Discrete-event models : how do quantities vary in the system?? Dynamic system model can be divided into two categories: d. Deterministic vs Stochastic Models Statistical uncertainty Most models have elements of certainty and uncertainty Deterministic Stochastic Model is deterministic if its outputs are fixed for a given set of inputs Model is stochastic if they reflect an element of uncertainty Eg: 3 step assembly process might indicate that each step takes exactly one hour entire process = three hour Each time the model is run, the results are always three hours. Eg: The same 3 steps assembly process might have the duration of each step vary around the one-hour average, with normal distribution having standard deviation of ten minutes.

Running this model many times will resulted many different answers, clustered around three hours. Corresponds closely to the accounting model category DSS Representational model category DSS How to deal with uncertainty?? Continuous-system models Discrete-event models Describe physical or economic processes, in which the numbers, that describe the system, vary continuously. Deal with systems in which individual events, occur at identifiable points in time, and change the state of the system instantaneously from one value to a different one Eg: Blood pressure varies continuously over time - there are processes that cause it to rise or fall at given rates . Eg: parts being assemble - the individual entities (parts) are assembled based on events (receipt or anticipation of

orders). Other examples: Arrival of a new order, customers calling, etc. In continuous models, values change based directly on changes in time - the time line for a continuous model is evenly spaced. The time between events in a discrete event model is seldom uniform. QIT3023 Information Systems and Decision Making Mohd. Noor abdul hamid mohdnoor@uum.edu.my 4 7.2 PROBABILITY All decision contain elements of uncertainty Those uncertainty must be quantified in some manner to make a good decision. Properly applied probability can be invaluable in structuring, resolution and choice selection of a given problem context improperly applied lead to decisions that are perfect in all respects except for their outcome three requirements of probability all probabilities must lie within the range of 0 to 1. the probabilities of all individual outcomes of an event must add up to the probability of their union (assuming all outcome is mutually exclusive the total probability of a complete set of outcomes must be equal to 1.

7.2.1 Type of Probability: a) Long run frequency Law of large numbers States that if an event or an experiment is repeated a large number of times, the observed frequency of a particular outcome of that event will be a good estimate of the true probability of that outcome Example : flip of a coin Often referred as a frequentists the estimation of probability through experimentation and repetitions Sometimes it is impractical or untenable b) Subjective probability Require a perspective that is different from the classical long-run frequency approach. Views probability as the degree of belief an individual has that a particular outcome will occur To adopt this approach is more than just allowing for probability estimations that are acts of faith Implicit in its acceptance is a set of underlying assumptions that, if satisfied, infer a set of number that can describe our degree of belief. c) Logical Probability Suggest that even though a probability may be derivable, its accuracy may not be acceptable under any circumstances. Situations where logical probability is applicable usually manifest themselves in a manner that suggests that a probability estimation of less than 100 percent is the same as zero. QIT3023 Information Systems and Decision Making Mohd. Noor abdul hamid mohdnoor@uum.edu.my

5 7.3 TECHNIQUE FOR FORECASTING PROBABILITIES 7.3.1 Direct Probability Forecasting the simplest technique for eliciting subjective probabilities Decision maker or expert is simply asked to estimate the probability of an outcome for a particular event Depend on how skill and experience to obtain the accurate estimation Properly obtained direct estimates can be useful and efficient methods of assigning numerical values to subjective probabilities 7.3.2 Odds Forecasting another method of expressing the subjective probability Focus on gambling perspective - to find specific amount of money to win or lose such that the decision maker is willing to accept either side of the bet once these amount determined, they can be transformed into odds and from there into estimates of probabilities Eg: Amount of money to win = X, amount of money to lose = Y, 7.3.3 Comparison Forecasting sometimes referred to as the lottery forecast present the decision maker with a choice between the participating in one of two lottery-like games: - uncertain event: winning a big prize, lose a small amount of money - reference game (with a known probability of winning): structured in the form of partially shaded wheel of fortune shaded represents a winner and the unshaded represents a loser. The probability of winning is repeatedly adjusted slightly upward or downward until the decision maker is indifferent as to which game to play. The assumption is that, if the decision maker is indifferent, it is his/her subjective

probability estimation of winning the uncertain game that creates this indifference. Subjective Probability: P(win) = Y . [X+Y] QIT3023 Information Systems and Decision Making Mohd. Noor abdul hamid mohdnoor@uum.edu.my 6 7.4 CALIBRATION AND SENSITIVITY 7.4.1 Calibration In most situations dont really need to know the exact probability for a particular outcome or event it is still just a probability A probability is just a specialized way of specifying an average. Although averages are useful descriptors, they can also be misleading. We need more information than simply a probability estimation if we are to make an informed decision. A well calibrate source requires years of experience and feedback to develop. 7.4.2 Sensitivity Analysis (a.k.a what-if analysis) Method use to determine the degree to which the alteration of an underlying assumption has a material effect on the results obtained from the model Performing sensitivity analysis on a model or model set can accomplish a number of useful objectives Variable highly sensitive or significant small change in the variable of interest causes a measurable change in the outcome Insensitive or insignificant varying a particular variable over its expected range produces only a minor change in the outcome 7.5 DISCRETE-EVENT SIMULATION MODEL

 Simulation Model?? Model : the description of the system (normally in a form of computer program) a thing Simulation : the process of using this model to study a system a process simulation cant exist without suitable model allow us to predict the behavior of a business system by modeling the expected behaviors and interactions of its components over time Characteristics of Simulation Model : - a dynamic model - a stochastic model - a discrete-event model QIT3023 Information Systems and Decision Making Mohd. Noor abdul hamid mohdnoor@uum.edu.my 7 7.5.1 Concept of Discrete-Event Simulation (DES) Model represents the states of the system by the values of data elements (variables) in the computer these variables change as events occur in the system. Must know how often different types of events occur can know how the variables changes reflect what would happen to the system in the real world. Simulation program are usually designed to gather helpful information about system behavior Most of DES are stochastic or probabilistic The accuracy of the decisions depends on the accuracy of the model Key to understand how DES work is : the future events queue list of events that are scheduled to take place in the system, together with the time that each will occur.

7.5.2 Designing a DES Model Process of designing DES: Determine the objective of the model Define the system itself Define the state of the system in terms of a set of state variables (or uncontrollable) variables. Define the events that can affect the state of the system and the impact of each event on each state variable. Choose the time units which the simulations will use. Define statistically, the rate at which each event occurs. Determine the statistics you would like to obtain from your simulation and what data you need in order to obtain them. Define the initial (starting) state of the system. Describe the model to a computer in a form of program reflect all the events that can take place in the system, their occurrence statistics and their impact on the state variables 7.6 RANDOM NUMBERS, PSEUDO-RANDOM NUMBER AND STATISTICAL DISTRIBUTIONS The behavior of a simulation model depends on the number (random) that determine when each event occurs. many ways to generate random numbers rolling a dice opening a phone book or table of random numbers with close eyes & choose a number using your finger computer computer : physical random number generator disadvantage of using truly random number is that their sequence is not repeatable. so pseudo-random numbers is used in simulation model generate by a

repeatable formula, which behave statistically as if they truly random