B6015: Decision Models Professor Ceria Summer 1998 Columbia Business School

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Sample final problem solutions are here dec_fin.xls proj_fin.xls

Homework problem solutions are here: ajax.xls pension.xls devcor.xls devcor_b.xls option_a.xls option_c.xls bond.xls

Review session problem solutions are here solution1.xls solution2.xls. There are two "styles" for doing this problem, both solutions are included.

To input a seed in Crystal Ball, go into Run Preferences|Sampling, and input the seed.

There is a typo in the case. In page 3, It should say "the allocation of regular seats Q". Q is the number of protected seats for the REGULAR class fare.

Login to the bulletin board for this course: Decision Models Bulletin Board

This course provides an introduction to computer-based models for decision making. The emphasis is on models that are widely used in diverse industries and functional areas, including finance, accounting, operations, and marketing. Applications will include production planning, supply chain management, foreign exchange and commodity trading, asset-liability management, portfolio optimization, corporate risk management, and yield management, among others.

The aim of the course is to help students become intelligent consumers of these methods. To this end, the course will cover the basic elements of modeling --- how to formulate a model and how to use and interpret the information a model produces. The course will attempt to instill a critical viewpoint towards decision models, recognizing that they are powerful but limited tools.

The applicability and usage of computer-based models have increased dramatically in recent years, due to the extraordinary improvements in computer, information and communication technologies, including not just hardware but also model-solution techniques and user interfaces. Twenty years ago working with a model meant using an expensive mainframe computer, learning a complex programming language, and struggling to compile data by hand; the entire process was clearly marked "experts only." The rise of personal computers, friendly interfaces (such as spreadsheets), and large data bases has made modeling far more accessible to managers. Information has come to be recognized as a critical resource, and models play a key role in deploying this resource, in organizing and structuring information so that it can be used productively.
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Winston and Albright, 1997, Practical Management Science: Spreadsheet Modeling and Applications, Duxbury Press, Belmont, CA. (W&A)

Crystal Ball: Forecasting & Risk Analysis for Spreadsheet Users (an add-in for Excel for creating simulations in a spreadsheet).

We will use spreadsheets fairly extensively throughout the course. In the lectures we will refer to the Excel spreadsheet package for Windows 95. This spreadsheet has extensive optimization capabilities built in. Crystal Ball is an add-in for Excel which makes it much easier to run simulations in a spreadsheet.
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There will be three homework problems that will be assigned during the course (in Lectures 4, 8 and 10), to be handed-in the following class. The homeworks are an individual assignment, and are designed as practice for the final exam. The main case is Morombian Airlines. This case can be done in groups of five or less and it due Friday, August 14th by 1:00 p.m. In addition for many of the class sessions, you will be asked to prepare a case for discussion in class.

The readings book has a set of practice problems. Many of these practice problems were based on past midterm and final examination questions. Some spreadsheets (in Excel .XLS format) related to these problems can be downloaded. The TA will go over the solutions to selected problems during the Friday review sessions or during office hours. Additional practice problems can be found throughout the W&A text.
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The final exam will be given on Thursday, August 20 at 2PM. There will be four hours for the final exam, although most students should be able to finish in three hours or less. The exam will be open book and open notes. A common final exam will be used for all sections of the course. Notebook computers will be needed in the final exam. Think of the computer as a fancy calculator: it is useful for checking one's work and for some questions the computer will be needed to get final answers. However, the majority of the points on the exam will be given for correct methods and analysis; correct numbers will only count for a small portion of the points. Printing will not be allowed in the final exam. Any answers from the computer must be transcribed into the answer book.
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The course grade will be based on a weighted average of the homeworks, main case, and the final exam. The weights will be 20% for the homeworks, 30% for the main case, and 50% for the final. All sections of the course will be graded on a common scale.
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Notebook PCs will be used in this course. It is recommended that students bring their notebook PCs to the Friday review sessions for software-related questions. Students should bring their notebook PCs to class on Lecture 8. Also, notebook computers will be needed for the final exam.
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• Optimization Practice Problems

•   Simulation Practice Problems