Downloadable - About University

13
Resource allocation
and negotiation problems
Introduction
In this chapter we will consider how decision analysis models can be
applied to two types of problem which usually involve groups of decision
makers. First, we will study problems where a limited resource has to be
allocated between a number of alternative uses. For example, a group of
product managers may have to decide on how next year’s advertising
budget should be divided between the products for which they are
responsible. Similarly, a local police force might have to determine
how its available personnel should be allocated between tasks such as
crime prevention, traffic policing and the investigation of serious and
petty crimes.
As Phillips 1,2 argues, the central purpose of resource allocation models
in decision analysis is to resolve what is known as the commons dilemma.
On the one hand, an organization can decentralize its decision making,
allowing each manager to make the best use of the resources which he
or she is allocated. While this delegation of responsibility will probably
motivate the managers, it is unlikely that the resulting set of independent
decisions will lead to an allocation of resources which is best for the
organization as a whole. The alternative is to centralize decision making,
but this may be demotivating and the resulting allocation will not
take into account the local knowledge of the individual managers. The
dilemma can be resolved by the managers meeting as a group, possibly
in a decision conference, and examining the effect of trading off resources
between their areas of responsibility. Of course, some managers may
find that they lose resources as a result of this process, but these
losses should be more than compensated by the increased benefits
of reallocating the resources elsewhere. As we shall see, the number
of combinations of options that are available in this sort of decision
problem can be very large, therefore a computer is normally required