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350 Resource allocation and negotiation problems
Discussion questions
(1) What is the commons dilemma and how can decision analysis help
to resolve it?
(2) Explain the distinction between within-criterion and across-criteria
weights in resource allocation models.
(3) A group of executives have to allocate investment funds between six
possible product lines. Their objectives are: (i) to maximize the growth
of the company, (ii) to maximize export earnings, (iii) to maximize
profit and (iv) to minimize risk.
After much debate the group decide to assign the following acrosscriteria
weights: Growth, 100; Exports, 10; Profit, 80; Risk, 20. Discuss
how these weights could have been derived and explain what
they mean.
(4) Will the use of a decision analysis resource allocation model in
a decision conference necessarily lead to an optimum allocation
of resources?
(5) Explain why sensitivity analysis is important when using resource
allocation models in a decision conference.
(6) What are the potential benefits of using decision analysis in negotiation
problems?
(7) What is meant by an efficient deal in the context of negotiation
problems?
(8) In what circumstances will the additive value model be inappropriate
when modeling a negotiator’s preferences?
(9) A retail chain would like to purchase a playing field from Bellton
council and build a new supermarket on the site. The negotiations
between the retailer and the council involve three key issues: (i) the
price at which the council will sell the land, (ii) whether the supermarket
will build a new community center to compensate the local
people for the loss of the playing field and (iii) the extent to which
the retailer will landscape the area around the supermarket when
the construction is complete (there will either be no landscaping,
‘partial landscaping’ or ‘complete landscaping’).
Given below are the values that the retailer and the council attach
to possible land prices that might be agreed (0 = worst outcome,
100 = best).
Price of land Retailer’s value Council’s value
$2million 100 0
$3million 80 60
$4million 0 100