ABSTRACT
Decision analysis or operations research consists of a large range of different techniques each suitable for different applications. This chapter introduces decision analysis by considering the stages in an operations research project. It then presents a summary of the success application of regression modeling by a company. Model building in regression analysis is the process of developing a regression model that best describes the relationship among the independent and dependent variables. In decision analysis terminology, the outcome resulting from making a certain decision and the occurrence of a particular state of nature is called the payoff. A central part of decision analysis is constructing a model of the real-world situation under study. The benefit of doing sensitivity analysis is that it can provide a better perspective on original judgement regarding the state-of-nature probabilities. Residual analysis suggested that a curvilinear relationship might provide a better model.
