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Appendix B

Decision Analysis: Using Payoff Matrices,

Decision Trees, and Implications Wheels in

Project Management

Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

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Decision Analysis

“If you see a fork in the road, take it.”

Yogi Berra

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Decision Analysis Tools

• Payoff Matrices

• Decision Trees

• Implication Wheels

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Decision Making Scenario: Determining Hope Mountain Tour Venues in Montreal

Hope Mountain, a country singer, is scheduled to tour 19 cities in North America (Canada, the United States, and Mexico). Her concert tour team is planning the details for each venue in the cities where she will play. During past tours, some Hope Mountain concerts have been booked into facilities that proved too small to meet demand, resulting in lost sales and unhappy fans. Also, ticket resellers have made large sums of money as market scarcity has inflated the value of concert seats sold in the secondary market. In other cases, tour planners overestimated ticket demand and wound up with minimal profits (and sometimes losses) because of the high numbers of unsold seats. Based on historical records from the previous 10 Hope Mountain tours in North America, members of the planning team have a fairly good perspective on her popularity in each location. APPB-4

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Exhibit B.2

Decision Options and Outcomes for Hope Mountain Tour Venues in Montreal

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Expected Value Calculations for for Hope Mountain Tour Venues in Montreal

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Exhibit B.3

General Structure of a Decision Tree

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Exhibit B.4

Initial Decision Tree for Hope Mountain Concert in Montreal

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Exhibit B.5

Completed Decision Tree for Hope Mountain Concert in Montreal

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Exhibit B.6

General Format for an Implication Wheel

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Exhibit B.7

Partial Implication Wheel for Moving Hope Mountain Concert to a Large Venue

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