A Simplified Portrayal for Certain Decision Making Problems

Abstract

The method described here provides a simple portrayal of a decision making sequence, where the decision variable differs from the quantity which varies with uncertainty. The graphical portrayal in three dimensions provides a basis from which conventional dynamic programming concepts can be applied to a class of problems which is difficult to clearly illustrate on a planar graph or decision tree. The analysis procedure is followed through for two practical examples involving decisions between two alternative equipments or plans where lease costs, costs of usage, and penalty costs are involved. The problem is similar to other cost minimization problems encountered in business and industry, and the method can be readily applied with elementary mathematical computations.