Bachelor of Science in Engineering Management: Strategic Decision Making Flashcards

Which decision-making framework explicitly separates the problem identification phase from the solution generation phase to reduce cognitive bias?

Answer: Kepner-Tregoe method

The Kepner-Tregoe method structures decision making into distinct phases—situation appraisal, problem analysis, decision analysis, and potential problem analysis—keeping problem definition separate from solution generation.

An engineering manager must choose between two capital projects with identical NPVs. Project A has a payback period of 2 years; Project B has a payback period of 5 years. Under uncertainty, which project is generally preferred and why?

Answer: Project A, because shorter payback periods reduce exposure to uncertainty

When NPVs are equal, a shorter payback period reduces the firm's exposure to future uncertainty and risk, making Project A preferable under uncertain conditions.

In game theory applied to strategic engineering management decisions, a Nash Equilibrium represents a state where:

Answer: No player can improve their outcome by unilaterally changing their strategy

A Nash Equilibrium occurs when each player's strategy is the best response to the strategies of all other players, so no single player benefits by deviating alone.

When applying the Analytic Hierarchy Process (AHP) to a vendor selection decision, the consistency ratio (CR) should be:

Answer: Less than or equal to 0.10 to confirm judgment consistency

AHP requires a CR ≤ 0.10 (10%) to confirm that pairwise comparisons are sufficiently consistent; higher values indicate the judgments should be revisited.

A company uses a decision tree and calculates the Expected Monetary Value (EMV) of launching a new product as $250,000 and not launching as $80,000. What is the Expected Value of Perfect Information (EVPI)?

Answer: Cannot be determined without probabilities

EVPI requires knowing the EMV under certainty (best outcome for each state of nature weighted by probabilities), which cannot be calculated from EMV alone without the underlying probability and payoff data.

The concept of 'bounded rationality' in engineering management decision making suggests that managers:

Answer: Seek a satisfactory rather than optimal solution due to cognitive and information limits

Herbert Simon's bounded rationality concept holds that decision makers 'satisfice'—choosing an option that is good enough—because cognitive limitations and incomplete information prevent true optimization.

In multi-criteria decision analysis (MCDA), which weighting method requires decision makers to directly assign numerical weights that sum to 1.0 across all criteria?

Answer: Direct rating method

The direct rating method asks decision makers to assign explicit numerical weights (summing to 1.0) directly to each criterion, without the comparative structure used in AHP.