**Course materials**

Course overview

Course requirements

**Week 1: Introduction. The language of probability.**

Approaching complex problems via decomposition

Probability diagrams

Counting

Preparing Excel for use at Kellogg

Simulation

KSim - A simulation tool

Example: Adverse selection

Mini-Quiz #1

Mini-Quiz answers

**Week 2: Probability and learning.**

Updating beliefs

Notes on probability

Computing probabilities

Probability exercises

Odds exercises

Examples: Birthdays, bags of balls, "Let's Make a Deal!"

Predicting the presidential election outcome (via simulation)

Mini-Quiz #2

Mini-Quiz answers

**Week 3: Random variables and expectations.**

Notes on random variables and expected value

Exercises on expectations

Example: Airline overbooking (the single-period inventory problem)

Example: A 5-dice game (and optional material on matrix multiplication)

Making decisions in the face of uncertainty

Mini-Quiz #3

Mini-Quiz answers

**Week 4: Random variables and variability.**

Notes on variability

Variability calculations

A graphical perspective on correlation

Exercises on variability

Comments on the role of spreadsheets in decision analysis

Examples of optimization using Excel's "Solver" add-in

Example: Minimum-risk portfolios

Mini-Quiz #4

Mini-Quiz answers

**Week 5: Commonly-encountered probability distributions.**

Notes on the binomial, geometric, and normal distributions (exponential, Poisson, uniform, and beta distributions optional)

Spreadsheet notes on the binomial and geometric distributions

Exercises on the binomial and geometric distributions

The Central Limit Theorem (demonstration spreadsheet)

The cumulative normal distribution (demonstration spreadsheet)

Exercises on the normal distribution

The single-period inventory problem

Useful Excel probability functions

Mini-Quiz #5

Mini-Quiz answers

**Week 6: Examples and applications.**

Monitoring a production process

Example: Adverse selection, with the normal distribution

Sample exam: Miscellany

Sample exam: Extreme Products Unlimited, Ltd.

Sample exam: ATM operations

Problems for*your*midterm

**Week 7: Midterm examination. Decision trees.**

Notes on decision trees

Processing a decision tree (slides)

Connecticut Electronics

Exercises on decision trees

Mini-Quiz #6

Mini-Quiz answers

**Weeks 8 and 9: Statistics, and the languages of estimation and hypothesis testing.**

**Estimation**

Notes on estimation

Slides on estimation

Exercises on estimation

Mini-Quiz #7

Mini-Quiz answers**Sampling**

Notes on sampling

Presidential polls

A Primer on Polls

A few sampling examples

Dealing with nonresponse bias

- Hypothesis Testing

Notes on hypothesis testing

An hypothesis-testing tool

[An hypothesis-testing paradigm, showing the details behind the "tool"]

Exercises on hypothesis testing with answers (spreadsheet) - Statistics Summary

**Week 10: Simulation.**

A research-and-development race

Contract bidding

Exercises on simulation

Commercial "simulation optimization" software:- Risk Solver from the Solver folks
- Decision Optimizer from the Crystal Ball people
- Risk Optimizer from the @Risk clan

Personal choice: Maximizing expected utility

Summary of expected spreadsheet skills

Class website, zipped (12-04-12)

Download, extract to a folder, and double-click "index.htm" to access offline.