ABSTRACT
Spreadsheets are flexible tools for constructing models for a variety of decision problems. This chapter provides a systematic approach to creating spreadsheet models, along with a number of “best practices” to facilitate construction of models that capture the most important features of each problem. Two specific examples are provided illustrating these tools—the case of MoviePass, a subscription-based theater attendance service, and a generic retirement planning model. In each case, model-building begins with a visualization of the problem. This visualization is then used to construct an initial model and explore insights. These models can then be expanded to introduce further factors that enrich the model. We develop a set of modeling practices used throughout the book.
One key feature of the modeling approach is identification of key factors that are inherently uncertain. These are the factors that are most suitable for simulation modeling, which is used in all subsequent chapters. Spreadsheet models are greatly enhanced as decision-making tools through the explicit modeling of uncertain and variable factors of a decision problem.
