DECISION

SCIENCE

Dr. A.B. Rao

M.A., L.L.B., Ph.D., MIMA
Ex. Director
Bharati Vidyapeethi Institute of Management
at New Delhi, Mumbai and Pune.

ISO 9001:2008 CERTIFIED

© Author
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First Edition : 2018

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 PREFACE
This book has been written with the specific objective of meeting the requirements of the MBA
students of Savitribai Phule Pune University for studying the subject of ‘Decision Science’ in
accordance with prescribed syllabus.

The important features of this book are:

(a) Lucid explanation of the theoretical principles.
(b) Solved problems in a number of chapters.
(c) Exercises at the end of each chapter.

My sincere thanks to the publishers for bringing out this book with zeal. Suggestions for the
improvement of this book will be thankfully received.

Dr. A.B. Rao

 SYLLABUS

Unit Details No. of

Sessions
I 1.1 Introduction: Importance of Decision Science and Role of Quantitative 9+2
Techniques in Decision Making.
1.2 Assignment Models: Concept, Flood’s Technique/Hungarian Method,
Applications including Restricted and Multiple Assignments.
1.3 Transportation Models: Concept, Formulation, Problem Types;
Balanced, Unbalanced, Minimization, Maximization, Basic Initial
Solution using North West Corner, Least Cost and VAM, Optimal
Solution using MODI.
II 2.1 Linear Programming: Concept, Formulation and Graphical Solution. 8+2
2.2 Markov Chains and Simulation Techniques: Markov Chains,
Applications Related to Management Functional Areas, Implications of
Steady State Probabilities, Decision Making Based on Inferences, Monte
Carlo Simulation, Scope and Limitations.
III 3.1 Decision Theory: Concept, Decision under Risk (EMV) and Uncertainty. 6+2
3.2 Game Theory: Concept, 2 by 2 Zero Sum Game with Dominance, Pure
and Mixed Strategy.
3.3 Queuing Theory: Concept, Single Server (M/M/I, Infinite, FIFO) and
Multi Server (M/M/C, Infinite, FIFO).
IV 4.1 CPM and PERT: Concept, Drawing Network, Identifying Critical Path 6+2
Network Calculations: Calculating EST, LST, EFT, LFT, Slack and
Probability of Project Completion.
4.2 Sequencing problems: Introduction, Problems Involving n Jobs-2
Machines, n Jobs-3 Machines and n Jobs-m Machines; Comparison of
Priority Sequencing Rules.
V 5.1 Probability: Concept, Addition, Conditional Probability Theorem Based
Decision Making (Numerical Based on Functional Areas of Business
Expected).
5.2 Probability Distributions: Normal, Binomial, Interval Estimation,
Standard Errors of Estimation.
 CONTENTS

No. Chapter Name Page No.

1 Quantitative Techniques: Statistics and Operations Research 1- 11
1.1. Decision Science
1.2 Meaning of Statistics
1.3 Definition and Scope of Statistics
1.4 Statistical Methods and Applied Statistics
1.5 Statistics and Mathematics
1.6 Statistics and Economics
1.7 Statistics and Econometrics
1.8 Use of Statistics in Trade, Commerce and Industry
1.9 Uses and Limitations of Statistics
1.10 Characteristics of OR (Operations Research)
1.11 Mathematical Models in OR
1.12 Operations Research Teams, Projects and Problems
1.13 Importance of Operations Research Techniques
1.14 Limitations of Operations Research Techniques
1.15 Exercises
2 Decision Theory and Problems 12 - 27
2.1. Introduction
2.2 Kinds of Decisions
2.3 Decision Criteria
2.4 Decision Trees
2.5 Exercises
3 Linear Programming 28 – 49
3.1. Introduction
3.2 Formulation of LP Problem
3.3 The Graphic Method
3.4 The Concept of Duality
3.5 Exercises
4 Transportation Problems 50 - 74
4.1 Transportation
4.2 Initial Feasible Solution: Methods
4.3 Exercises
5 Assignment Problems 75 - 93
5.1 Assignment
5.2 Assignment Problem: The Hungarian Method
5.3 Exercises
6 Queuing Theory and Problems 94 - 106
6.1 Introduction
6.2 Queuing System
6.3 Service Structure
6.4 Operational Characteristics
6.5 Queuing Models
6.6 Exercises
7 Simulation Techniques 107 - 120
7.1 Introduction
7.2. Meaning and Purpose of Simulation
7.3 Characteristics of the Process of Simulation
7.4 Simulations Procedures
7.5 Simulation: Its Application
7.6 Simulation: Its Merits and Demerits
7.7 Markov Chain
7.8 Exercises
8 Games Theory and Problems 121 - 135
8.1 Introduction
8.2 Preliminary Details
8.3 Mixed Strategy Games
8.4 Procedures for Solving a 2 q or p 2 Game
8.5 Dominance Method
8.6 Sub-games Method
8.7 Exercises
9 Critical Path Method (CPM) and Programme and Evolution and Review 136 - 167
Technique (PERT)
9.1 Introduction
9.2 CPM
9.3 PERT
9.4 Construction of a Network
9.5. Earliest and Latest Times
9.6 Critical Path: Its Meaning and Purpose
9.7 Meaning and Identification of the Float
9.8. PERT
9.9 Exercises
10 Probability and Probability Distributions 168 - 201
10.1 Meaning of Probability
10.2 Classical or Mathematical Definition of Probability
10.3 Probability of Set Theory
10.4 Frequency Definition of Probability
10.5 Permutations and Combinations
10.6 Types of Events
10.7 Laws of Probability
10.8 Bayes Theorem
10.9 Chapter Summary
10.10 Probability Distributions
10.10 Binomial Distribution
10.11 (A) Binomial Distribution
10.12 Fitting a Binomial Distribution
10.13 Poisson Distribution
10.14 Constants of the Poisson Distribution
10.15 Fitting a Poisson Distribution
10.16 Normal Distribution
10.17 Areas under the Normal Curve
10.18 Chief Characteristics
10.19 Exercises
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