DECISION ANALYSIS

Decision analysis can be used to determine an optimal strategy when a decision maker is faced with several
decision alternatives and an uncertain or risk-filled pattern of future events. For example, a company would
like to find the best location for its plant. Say, it has five options in five countries.
Factors that influence the decision are: world economy, demand in various regions of the world, labor
availability, raw materials costs, transportation costs, and so on.
Problem Formulation:
We have to start with a verbal statement of the problem.
Then we have to identify the decision alternatives, the uncertain future events, referred to as chance
events, and the consequences associated with each decision alternative and each chance event outcome.
PDC (Pitsburgh development Corporation) has three different sized projects:
Three decision alternatives
𝑑 = 𝑎 𝑠𝑚𝑎𝑙𝑙 𝑐𝑜𝑚𝑝𝑙𝑒𝑥
𝑑 = 𝑎 𝑚𝑒𝑑𝑖𝑢𝑚 𝑐𝑜𝑚𝑝𝑙𝑒𝑥
𝑑 = 𝑎 𝑙𝑎𝑟𝑔𝑒 𝑐𝑜𝑚𝑝𝑙𝑒𝑥
There are two uncertain future events which we call state of nature
𝑠 = 𝑠𝑡𝑟𝑜𝑛𝑔 𝑑𝑒𝑚𝑎𝑛𝑑 𝑓𝑜𝑟 𝑡ℎ𝑒 𝑐𝑜𝑚𝑝𝑙𝑒𝑥
𝑠 = 𝑤𝑒𝑎𝑘 𝑑𝑒𝑚𝑎𝑛𝑑 𝑓𝑜𝑟 𝑡ℎ𝑒 𝑐𝑜𝑚𝑝𝑙𝑒𝑥
Pay-off table for consequences
Pay-off for the PDC project (in $ million profit)
Decision alternatives State of Nature
Strong demand 𝑠 Weak demand 𝑠
𝑆𝑚𝑎𝑙𝑙 𝑐𝑜𝑚𝑝𝑙𝑒𝑥, 𝑑 8 7

𝑀𝑒𝑑𝑖𝑢𝑚 𝑐𝑜𝑚𝑝𝑙𝑒𝑥, 𝑑 14 5

𝐿𝑎𝑟𝑔𝑒 𝑐𝑜𝑚𝑝𝑙𝑒𝑥, 𝑑 20 -9
Influence Diagram:
An influence diagram is a graphical device that shows the relationships among the decisions, the chance
events, and the consequences for a decision problem. The nodes in an in fluence diagram represent the
decisions, chance events, and consequences. Rectangles or squares depict decision nodes, circles or ovals
depict chance nodes, and diamonds depict consequence nodes. The lines connecting the nodes, referred
to as arcs, show the direction of influence that the nodes have on one another.

State of Nature
Strong (s1)
Demand
Weak (s2)

Complex size Profit

Consequence
Profit
Decision alternatives
Small complex (d1)
Medium complex (d2)
Large complex (d3)
Pay-off Tables:
A table showing payoffs for all combinations of decision alternatives and state of nature if payoff table.
Pay-off for the PDC project (in $ million profit)
Decision alternatives State of Nature
Strong demand 𝑠 Weak demand 𝑠
𝑆𝑚𝑎𝑙𝑙 𝑐𝑜𝑚𝑝𝑙𝑒𝑥, 𝑑 8 7

𝑀𝑒𝑑𝑖𝑢𝑚 𝑐𝑜𝑚𝑝𝑙𝑒𝑥, 𝑑 14 5

𝐿𝑎𝑟𝑔𝑒 𝑐𝑜𝑚𝑝𝑙𝑒𝑥, 𝑑 20 -9

Decision Tree:
A decision tree provides a graphical representation of the decision-making process. It shows the natural or logical
progression that will occur over time.

Decision making without probabilities:

Optimistic Approach:
The optimistic approach evaluates each decision alternative in terms of the best payoff that can occur. The decision
alternative that is recommended is the one that provides the best possible payoff. For a problem in which maximum
profit is desired, as in the PDC problem, the optimistic approach would lead the decision maker to choose the
alternative corresponding to the largest profit. For problems involving minimization, this approach leads to
choosing the alternative with the smallest payoff.
Maximum payoff for each PDC decision alternative

Decision alternative Maximum payoff

𝑆𝑚𝑎𝑙𝑙 𝑐𝑜𝑚𝑝𝑙𝑒𝑥, 𝑑 8

𝑀𝑒𝑑𝑖𝑢𝑚 𝑐𝑜𝑚𝑝𝑙𝑒𝑥, 𝑑 14
 𝐿𝑎𝑟𝑔𝑒 𝑐𝑜𝑚𝑝𝑙𝑒𝑥, 𝑑 20
Maximum of the maximum payoff values

The maximum of the maximum payoff values is 20 which corresponds to 𝐿𝑎𝑟𝑔𝑒 𝑐𝑜𝑚𝑝𝑙𝑒𝑥, 𝑑 . The decision to
construct the large complex is recommended.
Conservative Approach:
The conservative approach evaluates each decision alternative in terms of the worst pay off that can occur. The
decision alternative recommended is the one that provides the best of the worst possible payoffs. For a problem in
which the output measure is profit, as in the PDC problem, the conservative approach would lead the decision maker
to choose the alternative that maximizes the minimum possible profit that could be obtained. For problems involving
minimization, this approach identifies the alternative that will minimize the maximum payoff.
Minimum payoff for each PDC decision alternative

Decision alternative Maximum payoff

𝑆𝑚𝑎𝑙𝑙 𝑐𝑜𝑚𝑝𝑙𝑒𝑥, 𝑑 7
Maximum of the minimum payoff values

𝑀𝑒𝑑𝑖𝑢𝑚 𝑐𝑜𝑚𝑝𝑙𝑒𝑥, 𝑑 5

𝐿𝑎𝑟𝑔𝑒 𝑐𝑜𝑚𝑝𝑙𝑒𝑥, 𝑑 -9

The maximum of the minimum payoff values is 7 which corresponds to 𝑆𝑚𝑎𝑙𝑙 𝑐𝑜𝑚𝑝𝑙𝑒𝑥, 𝑑 , the decision
alternative small complex is recommended.
Minimax Regret Approach:

The minimax regret approach to decision making is neither purely optimistic nor purely conservative. Let
us illustrate the minimax regret approach by showing how it can be used to select a decision alternative for
the PDC problem.
Opportunity loss or regret:

𝑹𝒊𝒋 = 𝑽𝒋 ∗ − 𝑽𝒊𝒋
Where,
R = the regret associated with decision alternative d and state of nature s

V ∗ = the payoff value corresponding to the best decision for the state of nature s

V = the payoff corresponding to decision alternative d and state of nature s

To calculate the regret, we simply subtract each entry in a column from the largest entry in the column. Thus, the
regret table is as follows:
Opportunity loss or regret table

Decision alternatives State of Nature

Strong demand 𝑠 Weak demand 𝑠
𝑆𝑚𝑎𝑙𝑙 𝑐𝑜𝑚𝑝𝑙𝑒𝑥, 𝑑 |20 − 8| = 12 |7 − 7| = 0

𝑀𝑒𝑑𝑖𝑢𝑚 𝑐𝑜𝑚𝑝𝑙𝑒𝑥, 𝑑 |20 − 14| = 6 |7 − 5| = 2

𝐿𝑎𝑟𝑔𝑒 𝑐𝑜𝑚𝑝𝑙𝑒𝑥, 𝑑 |20 − 20| = 0 |7 − (−9)| = 16

In the next step, we list the maximum regret for each decision alternative and then we select the alternative
corresponding to the minimum regret from the maximum regret.

Maximum regret for each decision alternative

Decision alternative Maximum regret

𝑆𝑚𝑎𝑙𝑙 𝑐𝑜𝑚𝑝𝑙𝑒𝑥, 𝑑 12

𝑀𝑒𝑑𝑖𝑢𝑚 𝑐𝑜𝑚𝑝𝑙𝑒𝑥, 𝑑 6
Minimum of the maximum regret

𝐿𝑎𝑟𝑔𝑒 𝑐𝑜𝑚𝑝𝑙𝑒𝑥, 𝑑 16

The minimum of the maximum regret is 6 corresponding to the decision alternative 𝑚𝑒𝑑𝑖𝑢𝑚 𝑐𝑜𝑚𝑝𝑙𝑒𝑥, 𝑑2 ,
hence the decision alternative for medium complex is recommended.
Decision making with probabilities:
When probabilities are available, we can use the expected value approach to identify the best decision alternative.
Let,
N= the number of states of nature

𝑃 𝑠 = 𝑡ℎ𝑒 𝑝𝑟𝑜𝑏𝑎𝑏𝑖𝑙𝑖𝑡𝑦 𝑜𝑓 𝑠𝑡𝑎𝑡𝑒 𝑜𝑓 𝑛𝑎𝑡𝑢𝑟𝑒 𝑠

The probabilities must satisfy two conditions:

𝑃 𝑠 ≥ 0 𝑓𝑜𝑟 𝑎𝑙𝑙 𝑠𝑡𝑎𝑡𝑒𝑠 𝑜𝑓 𝑛𝑎𝑡𝑢𝑟𝑒

𝑃 𝑠 = 𝑃(𝑠 ) + 𝑃(𝑠 ) + ⋯ … … … … … + 𝑃(𝑠 ) = 1

The expected value (EV) of decision alternative 𝑑 is defined as follows

𝐸𝑉(𝑑 ) = 𝑃 𝑠 𝑉

Let us assume,
𝑃(𝑠 ) = 0.8
𝑃(𝑠 ) = 0.2
Expected value for each decision alternative is:

EV( 𝑑 ) = 8 x 0.8+ 7 x 0.2= 7.8

EV( 𝑑 ) = 14 x 0.8+ 5 x 0.2= 12.2

EV( 𝑑 ) = 20 x 0.8+ (-9) x 0.2= 14.2

The maximum expected value is 14.2 corresponding to decision alternative 𝑑 large complex, hence the
large complex is recommended based on expected maximum profit.
Expected Value of Perfect Information:
If PDC could determine with certainty, prior to making a decision, which state of nature is going to occur.
Expected value of perfect information
EVPI= |𝐸𝑉𝑤𝑃𝐼 − 𝐸𝑉𝑤𝑜𝑃𝐼|
EVPI= expected value of perfect information
EVwPI= expected value with perfect information about the state of nature
EVwoPI= expected value without perfect information about the state of nature
If PDC sure about 𝑠 then the best strategy is 𝑑 and receive a payoff of $20 million and if PDC sure about
𝑠 then the best strategy is 𝑑 and receive a payoff of $7 million and we are given 𝑃(𝑠 ) = 0.8 and 𝑃(𝑠 ) =
0.2
Thus the expected value with perfect information is
EVwPI= 20 x 0.8+ 7 x 0.2= 17.4
Expected value without perfect information is based on expected value for each decision alternative

EV( 𝑑 ) = 8 x 0.8+ 7 x 0.2= 7.8

EV( 𝑑 ) = 14 x 0.8+ 5 x 0.2= 12.2

EV( 𝑑 ) = 20 x 0.8+ (-9) x 0.2= 14.2

Expected value without perfect information is the value which is the highest among expected values for decision
alternatives. In this problem,
EVwoPI= 14.2

Expected value of perfect information

EVPI= |𝐸𝑉𝑤𝑃𝐼 − 𝐸𝑉𝑤𝑜𝑃𝐼| = |17.4 − 14.2| = 3.2
Additional expected value is $3.2 million that can be obtained if perfect information were available about the state
of nature.
Sensitivity analysis:
Sensitivity analysis can be used to determine how changes in the probabilities for the state of nature and/or changes
in the payoffs affect the recommended decision alternative.

Case-1: how changes in the probabilities for the state of nature affect the recommended decision alternative
Pay-off for the PDC project (in $ million profit)
 Decision alternatives State of Nature
Strong demand 𝑠 Weak demand 𝑠
𝑆𝑚𝑎𝑙𝑙 𝑐𝑜𝑚𝑝𝑙𝑒𝑥, 𝑑 8 7

𝑀𝑒𝑑𝑖𝑢𝑚 𝑐𝑜𝑚𝑝𝑙𝑒𝑥, 𝑑 14 5

𝐿𝑎𝑟𝑔𝑒 𝑐𝑜𝑚𝑝𝑙𝑒𝑥, 𝑑 20 -9
Let, p denote the probability of state of nature 𝑠 ; 𝑡ℎ𝑎𝑡 𝑖𝑠 𝑃(𝑠 ) = 𝑝

Since, there are two state of nature in the PDC problem, the probability of state of nature 𝑠

𝑃(𝑠 ) = 1 − 𝑃(𝑠 ) = 1 − 𝑝
The expected value for each decision alternative can be calculated as follows:

EV(𝑑 ) = 8 x p+ 7 x (1-p)= 8p+7-7p= p+7

EV(𝑑 ) = 14 x p+ 5 x (1-p)= 14p+5-5p= 9p+5

EV(𝑑 ) = 20 x p+ (-9) x (1-p)= 20p-9+9p= 29p-9

We have to draw two vertical lines where p=0 and p=1
In the both lines, we have to show the expected value vertically for both p=0 and p=1 for each decision alternative.

EV(𝑑 ) = p+7

When p=0, EV(𝑑 ) = 7 ; p=1, EV(𝑑 ) = 8

EV(𝑑 ) = 14 x p+ 5 x (1-p)= 14p+5-5p= 9p+5

When p=0, EV(𝑑 ) = 5 ; p=1, EV(𝑑 ) = 14

EV(𝑑 ) = 20 x p+ (-9) x (1-p)= 20p-9+9p= 29p-9

When p=0, EV(𝑑 ) = −9 ; p=1, EV(𝑑 ) = 20

From the graph, at point A for the probability A, EV(d1)= EV(d2)

p+7=9p+5
or, 9p+5= p+7
or, 9p-p= 7-5
or, 8p= 2
or, p= 2/8= ¼= 0.25
The probability at point A is 0.25
From the graph, at point B for the probability B, EV(d2)= EV(d3)
9p+5=29p-9
Or, 29p-9= 9p+5
Or, 29p-9p= 5+9
Or, 20p= 14
Or, p= 14/20= 0.70
At point B, p= 0.70
For the probability of state of nature s1
𝑝 ≤ 0.25 𝑑 is the best
0.25 ≤ 𝑝 ≤ 0.70 𝑑 is the best
𝑝 ≥ 0.70 𝑑 is the best
Due to changes in the probability of state of nature the recommended decision alternative will change.
Case-2: how changes in the payoffs affect the recommended decision alternative
Pay-off for the PDC project (in $ million profit)
Decision alternatives State of Nature
Strong demand 𝑠 Weak demand 𝑠
𝑆𝑚𝑎𝑙𝑙 𝑐𝑜𝑚𝑝𝑙𝑒𝑥, 𝑑 8 7

𝑀𝑒𝑑𝑖𝑢𝑚 𝑐𝑜𝑚𝑝𝑙𝑒𝑥, 𝑑 14 5

𝐿𝑎𝑟𝑔𝑒 𝑐𝑜𝑚𝑝𝑙𝑒𝑥, 𝑑 20 -9
Let the probability for state of nature

𝑃(𝑠 ) = 0.80
𝑃(𝑠 ) = 1 − 0.80 = 0.20
EV(𝑑 ) = 8 x 0.8+ 7 x 0.2= 7.8

EV(𝑑 ) = 14 x 0.8+ 5 x 0.2= 12.2

EV(𝑑 ) = 20 x 0.8+ (-9) x 0.2= 14.2

Based on expected value, decision alternative d3 is recommended as because it has the highest expected value.
Sensitivity analysis for decision alternative d3
The expected value for d3 (the highest one) is 14.2 and the second highest expected value is for d2 which is 12.2
Decision alternative d3 will remain the optimal decision alternative as long as EV(𝑑 ) is greater than or equal to
the expected value of the second best decision alternative. Thus, decision alternative 𝑑 will remain the
optimal decision alternative as long as
𝐸𝑉(𝑑 ) ≥ 12.2

Let, S= the payoff of decision alternative 𝑑 when demand is strong

W= the payoff of decision alternative 𝑑 when demand is weak.

Using the probability, 𝑃(𝑠 ) = 0.80; 𝑃(𝑠 ) = 1 − 0.80 = 0.20

EV(𝑑 ) = 𝑆 x 0.8+ Wx 0.2= 0.8S+0.2W

Assuming that the payoff for 𝑑 stays at its original value of -9 million when demand is weak, 𝑑 will
remain optimal as long as
EV(𝑑 ) = 0.8S+0.2(-9)≥ 12.2

Or, 0.8S-1.8≥ 12.2

Or, 0.8S-1.8+1.8≥ 12.2 + 1.8
Or, 0.8S≥ 14
Or, 0.8S/0.8≥ 14/0.8
Or, S≥ 17.5
The decision alternative 𝑑 will remain optimal as long as the payoff for 𝑑 when demand is strong is at least
$17.5 million.
Assuming that the payoff for 𝑑 stays at its original value of 20 million when demand is strong, 𝑑 will
remain optimal as long as
EV(𝑑 ) = 0.8 x 20+0.2W≥ 12.2

Or, 16+0.2W≥ 12.2

Or, 16+0.2W-16≥ 12.2 − 16
Or, 0.2W≥ −3.8
Or, 0.2W/0.2≥ −3.8/0.2
Or, W≥ −19
The decision alternative 𝑑 will remain optimal as long as the payoff for 𝑑 when demand is weak is at least
-$19 million.
Sensitivity analysis for decision alternative d2

Decision alternative d3 will remain the optimal decision alternative as long as EV(𝑑 ) is less than or equal to the
expected value of the best decision alternative. Thus, decision alternative 𝑑 will remain the optimal
decision alternative as long as
𝐸𝑉(𝑑 ) ≤ 14.2

Let, S= the payoff of decision alternative 𝑑 when demand is strong

W= the payoff of decision alternative 𝑑 when demand is weak.

Using the probability, 𝑃(𝑠 ) = 0.80; 𝑃(𝑠 ) = 1 − 0.80 = 0.20
EV(𝑑 ) = 𝑆 x 0.8+ Wx 0.2= 0.8S+0.2W

Assuming that the payoff for 𝑑 stays at its original value of $5 million when demand is weak, 𝑑 will
remain optimal as long as
EV(𝑑 ) = 0.8S+0.2(5)≤ 14.2

Or, 0.8S+1≤ 14.2

Or, 0.8S+1-1≤ 14.2 − 1
Or, 0.8S≤ 13.2
Or, 0.8S/0.8≤ 13.2/0.8
Or, S≤ 16.5
The decision alternative 𝑑 will remain optimal as long as the payoff for 𝑑 when demand is strong is at best
$16.5 million.
Assuming that the payoff for 𝑑 stays at its original value of $14 million when demand is strong, 𝑑 will
remain optimal as long as
EV(𝑑 ) = 0.8 x 14+0.2W≤ 14.2

Or, 11.2+0.2W≤ 14.2

Or, 11.2+0.2W-11.2≤ 14.2 − 11.2
Or, 0.2W≤ 3
Or, 0.2W/0.2≤ 3/0.2
Or, W≤ 15
The decision alternative 𝑑 will remain optimal as long as the payoff for 𝑑 when demand is weak is at best
$15 million.
Sensitivity analysis for decision alternative d1

Decision alternative d3 will remain the optimal decision alternative as long as EV(𝑑 ) is less than or equal to the
expected value of the best decision alternative. Thus, decision alternative 𝑑 will remain the optimal
decision alternative as long as
𝐸𝑉(𝑑 ) ≤ 14.2

Let, S= the payoff of decision alternative 𝑑 when demand is strong

W= the payoff of decision alternative 𝑑 when demand is weak.

WAITING LINE MODELS

Operating characteristics:
1. The probability that no units are in the system
2. The average number of units in the waiting line
3. The average number of units in the system (the number of units in the waiting line plus the number
of units being served)
4. The average time a unit spends in the waiting line
 5. The average time a unit spends in the system (the waiting time plus the service time)
6. The probability that an arriving unit has to wait for service
Distribution of Arrivals:
Poisson probability distribution provides a good description of the arrival pattern. The Poisson probability function
provides the probability of x arrivals in a specific time period. The probability function is as follows:

𝜆 𝑒
𝑃(𝑥) = 𝑓𝑜𝑟 𝑥 = 0,1,2 … ….
𝑥!
Where, 𝑥 = 𝑡ℎ𝑒 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑎𝑟𝑟𝑖𝑣𝑎𝑙𝑠 𝑖𝑛 𝑡ℎ𝑒 𝑡𝑖𝑚𝑒 𝑝𝑒𝑟𝑖𝑜𝑑
𝜆 = 𝑡ℎ𝑒 𝑚𝑒𝑎𝑛 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑎𝑟𝑟𝑖𝑣𝑎𝑙𝑠 𝑝𝑒𝑟 𝑡𝑖𝑚𝑒 𝑝𝑒𝑟𝑖𝑜𝑑
e= 2.71828
Suppose that Burger Dome analyzed data on customer arrivals and concluded that the arrival rate is 45 customers per
hour.
For 1-minute period, the mean arrival rate would be, λ=45/60= 0.75 customer per minute
The probability of x customer arrivals during a 1-minute time period:
.
𝜆 𝑒 0.75 𝑒
𝑃(𝑥) = =
𝑥! 𝑥!
Thus, the probabilities of 0, 1, and 2 customer arrivals during a one-minute period are
.
0.75 𝑒
𝑃(0) = = 0.4724
0!
.
0.75 𝑒
𝑃(1) = = 0.3543
1!
.
0.75 𝑒
𝑃(2) = = 0.1329
2!
The probability of no customers in a one-minute period is 0.4724, the probability of one customer in a one-minute
period is 0.3543, and the probability of two customers in a one-minute period is 0.1329.
Distribution of Service Times

The service time is the time a customer spends at the service facility once the service has started.
Quantitative analysts have found that if the probability distribution for the service time can be assumed to follow an
exponential probability distribution, formulas are available for providing useful information about the operation
of the waiting line. Using an exponential probability distribution, the probability that the service time will be less
than or equal to a time of length t is

𝑃(𝑠𝑒𝑟𝑣𝑖𝑐𝑒 𝑡𝑖𝑚𝑒 ≤ 𝑡) = 1 − 𝑒
Where, 𝜇 = 𝑡ℎ𝑒 𝑚𝑒𝑎𝑛 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑢𝑛𝑖𝑡𝑠 𝑡ℎ𝑎𝑡 𝑐𝑎𝑛 𝑏𝑒 𝑠𝑒𝑟𝑣𝑒𝑑 𝑝𝑒𝑟 𝑡𝑖𝑚𝑒 𝑝𝑒𝑟𝑖𝑜𝑑
e= 2.71828
Suppose that Burger Dome studied the order-taking and order-filling process and found that the single food server
can process an average of 60 customer orders per hour. On a one-minute basis, the service rate would be 𝜇 =60
customers/ 60 minutes= 1 customer per minute. For example, with 𝜇 =1, we can use equation shown as above to
compute probabilities such as the probability an order can be processed in ¹Ú₂ minute or less, 1 minute or less, and 2
minutes or less. These computations are:
× .
𝑃(𝑠𝑒𝑟𝑣𝑖𝑐𝑒 𝑡𝑖𝑚𝑒 ≤ 0.5) = 1 − 𝑒 = 1 − 0.6065 = 0.3935
 ×
𝑃(𝑠𝑒𝑟𝑣𝑖𝑐𝑒 𝑡𝑖𝑚𝑒 ≤ 1) = 1 − 𝑒 = 1 − 0. .679 = 0.6321
×
𝑃(𝑠𝑒𝑟𝑣𝑖𝑐𝑒 𝑡𝑖𝑚𝑒 ≤ 2) = 1 − 𝑒 = 1 − 0.1353 = 0.8647
Thus, we would conclude that there is a 0.3935 probability that an order can be processed in ¹Ú₂ minute or less, a
0.6321 probability that it can be processed in 1 minute or less, and a 0.8647 probability that it can be processed in 2
minutes or less.
Queue Discipline
First-come, first-served basis.

SINGLE-CHANNEL WAITING LINE MODEL WITH POISSON ARRIVALS AND EXPONENTIAL

SERVICE TIMES
Operating characteristics:

1. The probability that no units are in the system

λ
P =1−
μ
2. The average number of units in the waiting line
λ
L =
μ(μ − λ)
3. The average number of units in the system (the number of units in the waiting line plus the number
of units being served)
L=L +
4. The average time a unit spends in the waiting line
L
W =
λ
5. The average time a unit spends in the system (the waiting time plus the service time)
1
𝑊=𝑊 +
𝜇
6. The probability that an arriving unit has to wait for service
λ
P =
μ
7. The probability of n units in the system
𝜆
𝑃 =( ) 𝑃
𝜇
For 1-minute period, the mean arrival rate would be, λ=45/60= 0.75 customer per minute
On a one-minute basis, the service rate would be 𝜇 =60 customers/ 60 minutes= 1 customer per minute.
λ< 𝜇

1. The probability that no units are in the system

λ 0.75
P = 1− =1− = 0.25
μ 1
2. The average number of units in the waiting line
λ 0.75
L = = = 2.25 𝐶𝑢𝑠𝑡𝑜𝑚𝑒𝑟𝑠
μ(μ − λ) 1(1 − 0.75)
3. The average number of units in the system (the number of units in the waiting line plus the number
of units being served)
.
L = L + = 2.25 + = 2.25 + 0.75 = 3 𝑐𝑢𝑠𝑡𝑜𝑚𝑒𝑟𝑠
4. The average time a unit spends in the waiting line
L 2.25
W = = = 3 𝑚𝑖𝑛𝑢𝑡𝑒𝑠
λ 0.75
5. The average time a unit spends in the system (the waiting time plus the service time)
1 1
𝑊 = 𝑊 + = 3 𝑚𝑖𝑛𝑢𝑡𝑒𝑠 + = 4 𝑚𝑖𝑛𝑢𝑡𝑒𝑠
𝜇 1
6. The probability that an arriving unit has to wait for service
λ 0.75
P = = = 0.75
μ 1
7. The probability of n units in the system
𝜆
𝑃 =( ) 𝑃
𝜇
When n=1
𝜆 0.75
𝑃 =( ) 𝑃 =( ) × 0.25 = 0.1875
𝜇 1
Number of customers Probability
0 0.2500
1 0.1875
2 0.1406
3 0.1055
4 0.0791
5 0.0593
6 0.0445
7 or more 0.1335

MULTIPLE-CHANNEL WAITING LINE MODEL WITH POISSON ARRIVALS AND

EXPONENTIAL SERVICE TIMES
A multiple-channel waiting line consists of two or more service channels that are assumed to be identical in terms
of service capability. In the multiple-channel system, arriving units wait in a single waiting line and then move to
the first available channel to be served. The single-channel Burger Dome operation can be expanded to a two-
channel system by opening a second service channel. Figure 11.3 shows a diagram of the Burger Dome two-channel
waiting line.

Conditions:
1. The arrivals follow a Poisson probability distribution.
2. The service time for each channel follows an exponential probability distribution.
3. The service rate is the same for each channel.
4. The arrivals wait in a single waiting line and then move to the first open channel for service.
Operating characteristics:
For 1-minute period, the mean arrival rate would be, λ=45/60= 0.75 customer per minute
On a one-minute basis, the service rate would be 𝜇 =60 customers/ 60 minutes= 1 customer per minute.
Number of service channel, k=2

1. The probability that no units are in the system

1 1
P = =
𝜆 𝜆 0.75 0.75
(𝜇 ) 𝜇 𝑘𝜇 ( 1 ) 1 2×1
∑
𝑛! + ( ) ∑ 𝑛! + 2! (
2 × 1 − 0.75
)
𝑘! 𝑘𝜇 − 𝜆
1
=
0.75
( 1 ) (0.75) 2
∑ +
𝑛! 2 × 1 (2 − 0.75)
 1
=
0.75
( 1 ) (0.75) 2
∑
𝑛! + 2 × 1 (2 − 0.75)
1
= = 0.4545
0.75 0.75
( 1 ) ( 1 ) (0.75) 2
0! + 1! + 2 ( )
0.25

2. The average number of units in the waiting line

𝜆 0.75
(𝜇 ) 𝜆𝜇 (0.75 × 1) (0.75) (0.75)
L = 𝑃 = 1 × 0.4545 = × 0.4545
(k − 1)! (kμ − λ) (2 − 1)! (2 × 1 − 0.75) (1)! (2 − 0.75)
(0.75) (0.75)
= × 0.4545 = 0.1227 𝐶𝑢𝑠𝑡𝑜𝑚𝑒𝑟
1 × (0.25)
3. The average number of units in the system (the number of units in the waiting line plus the number
of units being served)
.
L = L + = 0.1227 + = 0.8727 𝑐𝑢𝑠𝑡𝑜𝑚𝑒𝑟
4. The average time a unit spends in the waiting line
L 0.1227
W = = = 0.1636 𝑚𝑖𝑛𝑢𝑡𝑒
λ 0.75
5. The average time a unit spends in the system (the waiting time plus the service time)
1 1
𝑊 = 𝑊 + = 0.1636 𝑚𝑖𝑛𝑢𝑡𝑒 + = 1.1636 𝑚𝑖𝑛𝑢𝑡𝑒𝑠
𝜇 1
6. The probability that an arriving unit has to wait for service
1 𝜆 𝑘𝜇 1 0.75 2×1
P = 𝑃 = × 0.4545
𝑘! 𝜇 𝑘𝜇 − 𝜆 2! 1 2 × 1 − 0.75
1 2
= (0.75) × 0.4545
2 2 − 0.75
1 2
= (0.75) × 0.4545 = 0.2045
2 0.25
7. The probability of n units in the system
𝜆
(𝜇 )
𝑃 = 𝑃 𝑓𝑜𝑟 𝑛 ≤ 𝑘
𝑛!
𝜆
(𝜇 )
𝑃 = 𝑃 𝑓𝑜𝑟 𝑛 > 𝑘
𝑘! 𝑘 ( )

The probability that 0 unit in the system

P = 0.4545
The probability that 1 unit in the system
𝜆
(𝜇 )
𝑃 = 𝑃 𝑓𝑜𝑟 𝑛 ≤ 𝑘
𝑛!
 0.75
( 1 )
𝑃 = × 0.4545 = 0.3409
1!
The probability that 2 units in the system
𝜆
(𝜇 )
𝑃 = 𝑃 𝑓𝑜𝑟 𝑛 ≤ 𝑘
𝑛!
0.75
( 1 )
𝑃 = × 0.4545 = 0.1278
2!
The probability that 3 units in the system
𝜆
(𝜇 )
𝑃 = 𝑃 𝑓𝑜𝑟 𝑛 > 𝑘
𝑘! 𝑘 ( )

0.75
( 1 )
𝑃 = × 0.4545 = 0.0479
2! 2( )
SOME GENERAL RELATIONSHIPS FOR WAITING LINE MODELS
ECONOMIC ANALYSIS OF WAITING LINES

SOLUTION:
Req-(a): The mean or expected number of customers that will arrive in a five-minute period
𝜆 = 0.4 × 5 = 2 𝑐𝑢𝑠𝑡𝑜𝑚𝑒𝑟𝑠 𝑝𝑒𝑟 5 𝑚𝑖𝑛𝑢𝑡𝑒 𝑝𝑒𝑟𝑖𝑜𝑑
Req-(b): the probabilities that exactly x units will arrive during a five-minute time period
𝜆 𝑒
𝑃(𝑥) =
𝑥!
the probabilities that exactly 0 units will arrive during a five-minute time period

2 𝑒
𝑃(0) = = 0.1353
0!
the probabilities that exactly 1 unit will arrive during a five-minute time period
2 𝑒
𝑃(1) = = 0.2707
1!
the probabilities that exactly 2 units will arrive during a five-minute time period
2 𝑒
𝑃(2) = = 0.2707
2!
the probabilities that exactly 3 units will arrive during a five-minute time period
2 𝑒
𝑃(3) = = 0.1804
3!
Req-(c) The probability that delay will occur
𝑃(𝐷𝑒𝑙𝑎𝑦 𝑝𝑟𝑜𝑏𝑙𝑒𝑚) = 𝑃(𝑥 > 3) = 1 − 𝑃(𝑥 ≤ 3)
𝑃(𝑥 ≤ 3) = 𝑃(𝑥 = 0) + 𝑃(𝑥 = 1) + 𝑃(𝑥 = 2) + 𝑃(𝑥 = 3) = 0.1353 + 0.2707 + 0.2707 + 0.1804 = 0.8571
𝑃(𝐷𝑒𝑙𝑎𝑦 𝑝𝑟𝑜𝑏𝑙𝑒𝑚) = 𝑃(𝑥 > 3) = 1 − 𝑃(𝑥 ≤ 3)=1-0.8571= 0.1429

SOLUTION:
The service rate would be 𝜇 = 0.6 𝑐𝑢𝑠𝑡𝑜𝑚𝑒𝑟 𝑝𝑒𝑟 𝑚𝑖𝑛𝑢𝑡𝑒.
The probability that service time is t or less than t

𝑃(𝑠𝑒𝑟𝑣𝑖𝑐𝑒 𝑡𝑖𝑚𝑒 ≤ 𝑡) = 1 − 𝑒
Req-(a): The probability that service time 1 minute or less
. ×
𝑃(𝑠𝑒𝑟𝑣𝑖𝑐𝑒 𝑡𝑖𝑚𝑒 ≤ 1) = 1 − 𝑒 = 0.4512
Req-(2): The probability that service time 2 minute or less
. ×
𝑃(𝑠𝑒𝑟𝑣𝑖𝑐𝑒 𝑡𝑖𝑚𝑒 ≤ 2) = 1 − 𝑒 = 0.6988
Req-(c) The probability that service time 3 minutes or less
. ×
𝑃(𝑠𝑒𝑟𝑣𝑖𝑐𝑒 𝑡𝑖𝑚𝑒 ≤ 3) = 1 − 𝑒 = 0.3012

SOLUTION:

The mean or expected number of customers that will arrive in per minute period
𝜆 = 0.4
The service rate would be 𝜇 = 0.6 𝑐𝑢𝑠𝑡𝑜𝑚𝑒𝑟 𝑝𝑒𝑟 𝑚𝑖𝑛𝑢𝑡𝑒.
Single channel
1. The probability that no units are in the system
0.4
P = 1− = 0.3333
0.6
2. The average number of units in the waiting line
λ 0.4
L = = = 1.3333𝐶𝑢𝑠𝑡𝑜𝑚𝑒𝑟𝑠
μ(μ − λ) 0.6(0.6 − 0.4)
3. The average number of units in the system (the number of units in the waiting line plus the number
of units being served)
.
L = L + = 1.3333 + .
= 2 𝑐𝑢𝑠𝑡𝑜𝑚𝑒𝑟𝑠
4. The average time a unit spends in the waiting line
L 1.3333
W = = = 3.3333 𝑚𝑖𝑛𝑢𝑡𝑒𝑠
λ 0.4
5. The average time a unit spends in the system (the waiting time plus the service time)
1 1
𝑊 = 𝑊 + = 3.3333 𝑚𝑖𝑛𝑢𝑡𝑒𝑠 + = 5 𝑚𝑖𝑛𝑢𝑡𝑒𝑠
𝜇 0.6
6. The probability that an arriving unit has to wait for service
λ 0.4
P = = = 0.6667
μ 06