Expert answer:Comparing alternatives against each other
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Chapter 7: System Analysis and Design Evaluation
Chapter 7 focuses on alternatives, models, decision theory, multiple criteria, the decision
evaluation display, and decisions under risk and uncertainty.
Chapter 8 focuses on economic evaluation in classical equivalence terms and in terms of
both multiple criteria and multiple futures.
Then, in Chapter 9, classical and other optimization methods are developed for both
unconstrained and constrained applications in design and operations.
Queuing theory and analysis for both infinite and finite population situations is presented
in Chapter 10.
Finally, Chapter 11 is devoted to a variety of control concepts, models, and methods.
Systems Engineering and Analysis, Fifth Edition
Benjamin S. Blanchard • Wolter J. Fabrycky
Copyright ©2011, ©2006, ©1998 by Pearson Education, Inc.
Upper Saddle River, New Jersey 07458
All rights reserved.
Chapter 7 Objectives
Alternatives and their equivalent comparison as the basis for going beyond the known to
explore opportunities for technological progress;
A classification of models, models and indirect experimentation, and the formulation and
validation of decision models;
Two related paradigms for decision evaluation theory, money flow modeling and
economic optimization modeling;
Contrasting the role of models and modeling in design and operations;
Multiple criteria considerations and some classical methods for choosing from among
alternatives;
The decision evaluation display as a means for presenting and considering alternatives
under multiple criteria; and
A number of classical approaches and rules for dealing with risk and uncertainty in
decision making.
Systems Engineering and Analysis, Fifth Edition
Benjamin S. Blanchard • Wolter J. Fabrycky
Copyright ©2011, ©2006, ©1998 by Pearson Education, Inc.
Upper Saddle River, New Jersey 07458
All rights reserved.
Figure 7.1
Money flows for acquisition and utilization.
Decision evaluation often requires a
combination of both money flow
modeling and economic optimization
approaches.
Systems Engineering and Analysis, Fifth Edition
Benjamin S. Blanchard • Wolter J. Fabrycky
Copyright ©2011, ©2006, ©1998 by Pearson Education, Inc.
Upper Saddle River, New Jersey 07458
All rights reserved.
Systems Engineering and Analysis, Fifth Edition
Benjamin S. Blanchard • Wolter J. Fabrycky
Copyright ©2011, ©2006, ©1998 by Pearson Education, Inc.
Upper Saddle River, New Jersey 07458
All rights reserved.
Figure 7.2
Economic optimization in design and operations.
Because there are specific target values of the design-dependent parameters desired by the
customer (TPMs*), these alternatives must be evaluated in the multiple criteria domain in such
a way that the TPM deviations from desired values can easily be observed.
Systems Engineering and Analysis, Fifth Edition
Benjamin S. Blanchard • Wolter J. Fabrycky
Copyright ©2011, ©2006, ©1998 by Pearson Education, Inc.
Upper Saddle River, New Jersey 07458
All rights reserved.
The most important concern in the selection of criteria or attributes is that they be
independent of each other.
Those judged to have an insignificant effect on the alternatives being considered can be
safely eliminated from the analysis.
Systems Engineering and Analysis, Fifth Edition
Benjamin S. Blanchard • Wolter J. Fabrycky
Copyright ©2011, ©2006, ©1998 by Pearson Education, Inc.
Upper Saddle River, New Jersey 07458
All rights reserved.
(1) better, (2) cheaper, (3) faster, (4) repairable, and (5) disposable.
When there are N criteria or alternatives to be ranked, N(N – 1)/2 pairs
must be compared.
Systems Engineering and Analysis, Fifth Edition
Benjamin S. Blanchard • Wolter J. Fabrycky
Copyright ©2011, ©2006, ©1998 by Pearson Education, Inc.
Upper Saddle River, New Jersey 07458
All rights reserved.
Systems Engineering and Analysis, Fifth Edition
Benjamin S. Blanchard • Wolter J. Fabrycky
Copyright ©2011, ©2006, ©1998 by Pearson Education, Inc.
Upper Saddle River, New Jersey 07458
All rights reserved.
Systems Engineering and Analysis, Fifth Edition
Benjamin S. Blanchard • Wolter J. Fabrycky
Copyright ©2011, ©2006, ©1998 by Pearson Education, Inc.
Upper Saddle River, New Jersey 07458
All rights reserved.
Systems Engineering and Analysis, Fifth Edition
Benjamin S. Blanchard • Wolter J. Fabrycky
Copyright ©2011, ©2006, ©1998 by Pearson Education, Inc.
Upper Saddle River, New Jersey 07458
All rights reserved.
Figure 7.3
Bar chart for weighted evaluation.
Systems Engineering and Analysis, Fifth Edition
Benjamin S. Blanchard • Wolter J. Fabrycky
Copyright ©2011, ©2006, ©1998 by Pearson Education, Inc.
Upper Saddle River, New Jersey 07458
All rights reserved.
Figure 7.4
General decision evaluation display.
Systems Engineering and Analysis, Fifth Edition
Benjamin S. Blanchard • Wolter J. Fabrycky
Copyright ©2011, ©2006, ©1998 by Pearson Education, Inc.
Upper Saddle River, New Jersey 07458
All rights reserved.
Figure 7.5
The decision evaluation matrix.
Systems Engineering and Analysis, Fifth Edition
Benjamin S. Blanchard • Wolter J. Fabrycky
Copyright ©2011, ©2006, ©1998 by Pearson Education, Inc.
Upper Saddle River, New Jersey 07458
All rights reserved.
Figure 7.6
Decisions under Assumed Certainty.
Decision evaluation vector.
Systems Engineering and Analysis, Fifth Edition
Benjamin S. Blanchard • Wolter J. Fabrycky
Copyright ©2011, ©2006, ©1998 by Pearson Education, Inc.
Upper Saddle River, New Jersey 07458
All rights reserved.
Decision Making under Risk
Systems Engineering and Analysis, Fifth Edition
Benjamin S. Blanchard • Wolter J. Fabrycky
Copyright ©2011, ©2006, ©1998 by Pearson Education, Inc.
Upper Saddle River, New Jersey 07458
All rights reserved.
Aspiration Level Criterion
Under the aspiration level criterion, management must set a
minimum aspiration level for profit and possibly a maximum
aspiration level for loss.
Systems Engineering and Analysis, Fifth Edition
Benjamin S. Blanchard • Wolter J. Fabrycky
Copyright ©2011, ©2006, ©1998 by Pearson Education, Inc.
Upper Saddle River, New Jersey 07458
All rights reserved.
Expected Value Criterion.
The calculation of the expected value requires weighing all payoffs by their probabilities of
occurrence. These weighed payoffs are then summed across all futures for each alternative. For
the computer systems firm, Alternatives A1–A4 yield the following expected profits (in
thousands):
Under the Laplace principle, the probability of the occurrence of each future state of nature is
assumed to be 1/n, where n is the number of possible future states. To select the best alternative,
one would compute the arithmetic average for each.
Systems Engineering and Analysis, Fifth Edition
Benjamin S. Blanchard • Wolter J. Fabrycky
Copyright ©2011, ©2006, ©1998 by Pearson Education, Inc.
Upper Saddle River, New Jersey 07458
All rights reserved.
Two simple decision rules are available for dealing with decisions under uncertainty. The first is the
maximin rule, based on an extremely pessimistic view of the outcome of nature. The use of this
rule would be justified if it is judged that nature will do its worst.
Systems Engineering and Analysis, Fifth Edition
Benjamin S. Blanchard • Wolter J. Fabrycky
Copyright ©2011, ©2006, ©1998 by Pearson Education, Inc.
Upper Saddle River, New Jersey 07458
All rights reserved.
The second is the maximax rule, based on an extremely optimistic view of the future.
Systems Engineering and Analysis, Fifth Edition
Benjamin S. Blanchard • Wolter J. Fabrycky
Copyright ©2011, ©2006, ©1998 by Pearson Education, Inc.
Upper Saddle River, New Jersey 07458
All rights reserved.
Most people have a degree of optimism or pessimism somewhere between the extremes. A
third approach to decision making under uncertainty involves an index of relative optimism and
pessimism.
When α = 0, the decision maker is pessimistic about nature, while an α = 1 indicates optimism
about nature.
Systems Engineering and Analysis, Fifth Edition
Benjamin S. Blanchard • Wolter J. Fabrycky
Copyright ©2011, ©2006, ©1998 by Pearson Education, Inc.
Upper Saddle River, New Jersey 07458
All rights reserved.
Figure 7.7
Values for the Hurwicz rule for four alternatives.
Systems Engineering and Analysis, Fifth Edition
Benjamin S. Blanchard • Wolter J. Fabrycky
Copyright ©2011, ©2006, ©1998 by Pearson Education, Inc.
Upper Saddle River, New Jersey 07458
All rights reserved.
Chapter 7 Summary
• This chapter ends with a section combining decision making under
certainty, risk, and uncertainty, based on the decision evaluation
matrix. A single certain future is often assumed, but rarely
encountered. Accordingly, risk is often addressed with the utilization
of probability measures and a number of selection methods.
• Decision making under uncertainty is also addressed through the
application of selection rules, but without the use of probability
statements about future outcomes.
• Selection of the appropriate formal method or model for a given
decision situation depends upon the nature of the decision and the
preference of the decision maker.
• There is no rule or set of guidelines that may be applied in all cases.
However, it is generally accepted that use of structured methods and
techniques can minimize the omission of options and other factors of
importance.
Systems Engineering and Analysis, Fifth Edition
Benjamin S. Blanchard • Wolter J. Fabrycky
Copyright ©2011, ©2006, ©1998 by Pearson Education, Inc.
Upper Saddle River, New Jersey 07458
All rights reserved.
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