Explain various Decision Making Tools?

Various decision making tools are :-

1. Pay Off Matrix :– The main characteristics of the pay off matrix can be summarized as the follows –
a. Very commonly used method.
b. Acts as a very good quantitative technique.
c. Helps in summarizing the various interactions of the various alternative actions and the various events.
d. Explains about the probability in a very good manner.
e. The probability is expressed in terms of the percentages.
f. The probability can also be expressed in terms of the number of the times the particular event is appropriate to occur in a hundred trials.
g. With the help of the probability, the pay off matrix can be prepared.
h. The pay off matrix helps the decision maker a lot as it provides him with the quantitative measures of the pay off for each of the possible consequences and also each for the alternatives, which are under the consideration this is generally referred to as the Expected Value (E.V).

But the pay off matrix also has some weaknesses and these can be summarized as the follows –
a. The pay off matrix is very largely dependent on the decision maker’s judgment about the possible outcomes for each of the alternative and also the values, which are assigned by the Decision Maker to each of them.
b. The decision maker is forced by the pay off matrix to make a firm judgment about what he thinks may happen and the worth to him to those outcomes.
c. The pay off matrix doesnot make a decision but instead it forces the Decision maker to be more realistic about the various outcomes that are possible.

2. Decision Tree
a. This technique is also referred to as the Decision Tables.
b. Is a very simple technique.
c. Helps in the representation of the sequential multistage logic of a decision problem.
d. Shows the various decision paths that may be taken in – to account rather than the criteria used for the selection of a given path.
e. The main concept of the technique is actually based on the extension of the probability theory.
f. Decision Tree technique generally mathematically factors the degree of the risk into a business decision.
g. Very helpful in representing the various probabilities for the outcomes.
h. Helps the decision maker in working out the various options and along with this also helps a lot in taking care of the different types of the odds and further helps in making a reasonably precise comparison among the various alternative courses of the action.
i. Helps in the presentation of the analysis, when the decision maker has to make a sequence of the decisions and this is referred to as the Decision Node.
j. Then after this movement takes place on to the various options emanating points and this is referred to as the Chance Nodes.
k. The various steps that are to be followed in the process of this technique can be summarized as the follows –
A. First of all, the tree has to be made with the help of the various types of the decision points.
B. After this, the branches are to be added mainly for the external states of the events, which have the possibility of occurring.
C. Then the probability of each of the state has to be included and then followed by the assignment of a value for each of the unique branches.
D. Then one has to work in the backward direction as this step helps a great deal in analyzing the various consequences at each node of the tree.

3. Decision Rules –
a. The decision rules and the decision tables find their use together in the process of the decision – making.
b. Are generally used for the programmable or the routine / operating decisions.
c. With the help of the Decision Rules, one is able to make the various decisions very economically and also in a very much efficient manner.
d. Also the decisions taken are more accurate and also faster in the nature.
e. The decision rules are documented in the nature.

4. Decision Table –
a. Is very much precise and also very compact in the nature.
b. Is very critical for the analyst as it helps the analyst to take in to account the various options, conditions, variables and the alternatives.
c. Documents the rules that are used for the selection of one or more actions based on one or more conditions from a set of the various conditions that are possible.
d. Can include both the qualitative and the quantitative bases for the decision making.
e. Decision Tables are in the form of “IF” LISTINGS and “THEN” LISTINGS.
f. The “IF” listings stipulate the required conditions.
g. The “THEN” listings offer the actions that are needed to be taken if the suitable conditions are present.
h. The “IF” LISTINGS form the ‘CONDITION STUB’ and the “THEN” LISTINGS form the ‘ACTION STUB’.
i. But this technique can only be used in the conjunction with the other techniques.