Probability to Make a Decision Under Uncertainty
Businesses are often faced with the need to make decisions under conditions of uncertainty. There are different approaches which the decision makers may use. In some cases there may be the use of intuition, but even where it is believed that the decision is based on intuition of a ‘gut’ feeling; there will be a potential range of influences, such as previous experience, assumptions and stereotypes (Ames et al., 2012). However, in most cases, especially where a decision will impact on the bottom line, managers will seek to make the decision based on more than simply feelings or potentially subjective assessments. One approach is the utilization of probability; assessing the probability that that a particular outcome will or will not, happen (Anderson et al., 2001). To consider the way probability may be used to assess a decision under uncertainty an example may be used. A farmer (or other trader) has been offered a stall at an annual festival. The trader knows that if the weekend remains sunny the festival will have a high number of attendees and there is the potential for a high profit. However, if there is rain the number of festival attendees will drop and the potential for profits will drop. The trader has also found out that one of their main competitors has been asked to attend, if there is no competition there will be a greater potential level of profit, compared to if competition is present.
This is a scenario where there are different variables, but there are only a fixed number of potential outcomes. This situation is one which is suitable to be assessed with probability. The two variables are independent of each other, in a classic approach to probability a decision tree may be used to assess the different potential outcomes. The decision tree is shown in figure 1, where the different considerations are made one by one.
Figure 1; Decision Tree
The decision tree shows there are four potential outcomes, which may be described as FN, FC, RN and RC. In the classic approach there is a starting point where there is assumption that the different outcomes are all equally likely (Stein and Foster, 2001). This is true for many of the examples used in books, such as coin tossing where heads and tails are known to be equally lily, or the use of a dice which is not loaded. If this is assumption is accurate then there would be a 0.5 chance of the festival being fine and a 0.5 chance of there being rain. In turn there would be the assumption that there would be a 0.5 chance of there being no competition and a 0.5 chance of competition being present. In each case the probability of each outcome will be the probability of each stage of the decision tree multiplied, so it will be 0.5 x 0.5 = 0.25.
However, the business manager is aware that the probability is unlikely to be even. Therefore it is necessary to look at different approaches which may be used to assess probability. There are a few tools which may be used. Historical data may be useful, looking at the probability that that particular weekend will have rain by assessing the proportion of times the same weekend has had rain in the past. If it is found that in six out if the last ten years the weather was fine, but in four out of the last ten years it rain, it may be extrapolated that the chances of the weather raining fine are 0.6, and the chances of rain is 0.4. Historical data may be used for forecasting, but past patterns will not necessarily be reliable.
To gain a more reliable assessment there are alternatives; the weather service makes advanced forecasts based on a large amount of data. However, to gain this information the business will have to pay a fee. This means that there is a cost associated with gaining the more accurate data. It may also be assumed that if data to be used in the decision is being gained from an external source, there may also be a time delay. If a fast decision is needed, the decision may need to be based only in the information at hand, trading off the potential accuracy to gain the speed. If the decision is not needed quickly, then the extra time may be well spent; accuracy will be gain at the cost of speed. If the forecast from the weather service is that there is only a 30% chance of rain over that weekend, this can be used in the probably calculation, showing a 0.7 probability that it will be fine, and a 0.3 probability it will rain.
Assessing the accurate probability that there will be competition is more difficult. The trader knows that only one competitor has been invited. It may also be known and that in the past some years they have attended the festival, but in other years they have attended an alternate festival; five years at each. As there is no approach that is likely to be accurate, so the most viable approach is to use the historical data, giving 0.5 probability of each potential outcome.
This may then be used to assess the probability of each outcome.
Table 1; Probability table
This shows that the probabilities. However the business will also want to assess the potential financial impact. For this historical data and estimates may be used. If it is assumed that the stall will cost $5,000, and if it is fine net revenues on the goods will be $20,000, but if it is raining the net revenues will only be $8,000. If competition is present the overall level of net revenue will be halved with the trade shared between two traders.
Table 2; Revenues for each outcome
Less fee for stall
From this it is apparent that there is only one outcome where there is a loss; that is where it rains and where the competition is present. This means there is only a 0.15 probability of the firm making a loss and a 0.85 probability that there will be a profit. Therefore, in this case it is recommended that the business takes the stall, as long as there is not a better opportunity available.
Ames, D. R; Weber, E. U; Zou, X, (2012), Mind-reading in strategic interaction: The impact of perceived similarity on projection and stereotyping, Organizational Behavior and Human Decision Processes, 117, 96-110
Anderson, David R., Sweeney, Dennis J; Davis, Duane; Utts, Jessica M; Williams, Thomas a; Simon, Marilyn, (2001), Statistics and Research Methods for Managerial Decisions, South-Western College Publishing
Stine, Robert a; Foster, Dean, (2010), Statistics for Business: Decision Making and Analysis, Pearson
Get Professional Assignment Help Cheaply
Are you busy and do not have time to handle your assignment? Are you scared that your paper will not make the grade? Do you have responsibilities that may hinder you from turning in your assignment on time? Are you tired and can barely handle your assignment? Are your grades inconsistent?
Whichever your reason is, it is valid! You can get professional academic help from our service at affordable rates. We have a team of professional academic writers who can handle all your assignments.
Why Choose Our Academic Writing Service?
- Plagiarism free papers
- Timely delivery
- Any deadline
- Skilled, Experienced Native English Writers
- Subject-relevant academic writer
- Adherence to paper instructions
- Ability to tackle bulk assignments
- Reasonable prices
- 24/7 Customer Support
- Get superb grades consistently
Online Academic Help With Different Subjects
Students barely have time to read. We got you! Have your literature essay or book review written without having the hassle of reading the book. You can get your literature paper custom-written for you by our literature specialists.
Do you struggle with finance? No need to torture yourself if finance is not your cup of tea. You can order your finance paper from our academic writing service and get 100% original work from competent finance experts.
While psychology may be an interesting subject, you may lack sufficient time to handle your assignments. Don’t despair; by using our academic writing service, you can be assured of perfect grades. Moreover, your grades will be consistent.
Engineering is quite a demanding subject. Students face a lot of pressure and barely have enough time to do what they love to do. Our academic writing service got you covered! Our engineering specialists follow the paper instructions and ensure timely delivery of the paper.
In the nursing course, you may have difficulties with literature reviews, annotated bibliographies, critical essays, and other assignments. Our nursing assignment writers will offer you professional nursing paper help at low prices.
Truth be told, sociology papers can be quite exhausting. Our academic writing service relieves you of fatigue, pressure, and stress. You can relax and have peace of mind as our academic writers handle your sociology assignment.
We take pride in having some of the best business writers in the industry. Our business writers have a lot of experience in the field. They are reliable, and you can be assured of a high-grade paper. They are able to handle business papers of any subject, length, deadline, and difficulty!
We boast of having some of the most experienced statistics experts in the industry. Our statistics experts have diverse skills, expertise, and knowledge to handle any kind of assignment. They have access to all kinds of software to get your assignment done.
Writing a law essay may prove to be an insurmountable obstacle, especially when you need to know the peculiarities of the legislative framework. Take advantage of our top-notch law specialists and get superb grades and 100% satisfaction.
What discipline/subjects do you deal in?
We have highlighted some of the most popular subjects we handle above. Those are just a tip of the iceberg. We deal in all academic disciplines since our writers are as diverse. They have been drawn from across all disciplines, and orders are assigned to those writers believed to be the best in the field. In a nutshell, there is no task we cannot handle; all you need to do is place your order with us. As long as your instructions are clear, just trust we shall deliver irrespective of the discipline.
Are your writers competent enough to handle my paper?
Our essay writers are graduates with bachelor's, masters, Ph.D., and doctorate degrees in various subjects. The minimum requirement to be an essay writer with our essay writing service is to have a college degree. All our academic writers have a minimum of two years of academic writing. We have a stringent recruitment process to ensure that we get only the most competent essay writers in the industry. We also ensure that the writers are handsomely compensated for their value. The majority of our writers are native English speakers. As such, the fluency of language and grammar is impeccable.
What if I don’t like the paper?
There is a very low likelihood that you won’t like the paper.
- When assigning your order, we match the paper’s discipline with the writer’s field/specialization. Since all our writers are graduates, we match the paper’s subject with the field the writer studied. For instance, if it’s a nursing paper, only a nursing graduate and writer will handle it. Furthermore, all our writers have academic writing experience and top-notch research skills.
- We have a quality assurance that reviews the paper before it gets to you. As such, we ensure that you get a paper that meets the required standard and will most definitely make the grade.
In the event that you don’t like your paper:
- The writer will revise the paper up to your pleasing. You have unlimited revisions. You simply need to highlight what specifically you don’t like about the paper, and the writer will make the amendments. The paper will be revised until you are satisfied. Revisions are free of charge
- We will have a different writer write the paper from scratch.
- Last resort, if the above does not work, we will refund your money.
Will the professor find out I didn’t write the paper myself?
Not at all. All papers are written from scratch. There is no way your tutor or instructor will realize that you did not write the paper yourself. In fact, we recommend using our assignment help services for consistent results.
What if the paper is plagiarized?
We check all papers for plagiarism before we submit them. We use powerful plagiarism checking software such as SafeAssign, LopesWrite, and Turnitin. We also upload the plagiarism report so that you can review it. We understand that plagiarism is academic suicide. We would not take the risk of submitting plagiarized work and jeopardize your academic journey. Furthermore, we do not sell or use prewritten papers, and each paper is written from scratch.
When will I get my paper?
You determine when you get the paper by setting the deadline when placing the order. All papers are delivered within the deadline. We are well aware that we operate in a time-sensitive industry. As such, we have laid out strategies to ensure that the client receives the paper on time and they never miss the deadline. We understand that papers that are submitted late have some points deducted. We do not want you to miss any points due to late submission. We work on beating deadlines by huge margins in order to ensure that you have ample time to review the paper before you submit it.
Will anyone find out that I used your services?
We have a privacy and confidentiality policy that guides our work. We NEVER share any customer information with third parties. Noone will ever know that you used our assignment help services. It’s only between you and us. We are bound by our policies to protect the customer’s identity and information. All your information, such as your names, phone number, email, order information, and so on, are protected. We have robust security systems that ensure that your data is protected. Hacking our systems is close to impossible, and it has never happened.
How our Assignment Help Service Works
1. Place an order
You fill all the paper instructions in the order form. Make sure you include all the helpful materials so that our academic writers can deliver the perfect paper. It will also help to eliminate unnecessary revisions.
2. Pay for the order
Proceed to pay for the paper so that it can be assigned to one of our expert academic writers. The paper subject is matched with the writer’s area of specialization.
3. Track the progress
You communicate with the writer and know about the progress of the paper. The client can ask the writer for drafts of the paper. The client can upload extra material and include additional instructions from the lecturer. Receive a paper.
4. Download the paper
The paper is sent to your email and uploaded to your personal account. You also get a plagiarism report attached to your paper.
PLACE THIS ORDER OR A SIMILAR ORDER WITH US TODAY AND GET A PERFECT SCORE!!!