Analysis of Value  Course Design
The "Analysis of Value" course is the first course in a two course
sequence taught to students in the MIB program. The objective of the course is to
introduce elements of modern decision analysis to management students, with a primary
emphasis on demonstrating the utility of analytical methods for decisionmaking under
uncertainty.
The entire two course sequence covers the following elements:
A key element of this course structure is that the first course is a strict prerequisite
to the second course in advanced decision methods., taught at the MIBParis later
in the spring, which introduces multiattribute utility, both theory and practice,
and leads the students to synthesize MAUA and cost analysis into a complete dynamic
strategic plan. Further analytical methods, based upon real options theory, also
compose a part of the second course in this sequence.
The first course in the sequence will be conducted by Frank Field of the Massachusetts
Institute of Technology; the second course will be conducted by Richard de Neufville
and Joel Clark of the Massachusetts Institute of Technology.
A complete set of course materials will be supplied, constituting all the textual
material necessary for both parts of the twocourse sequence. Further, we also recommend
that the students have access to Applied Systems Analysis: Engineering Planning
and Technology Management by Richard de Neufville. We suggest that the students
have reviewed (but not necessarily studied in detail) Chapters 1319, with the expectation
that the course will cover this material in greater detail. Because this book is currently
out of print, electronic versions of the relevant chapters are available on the WWW.
As a course in methods, there will be substantial reliance upon computer tools,
particularly spreadsheets. Please plan on using available computer facilities, and
bring a laptop if you have one available  particularly for the case study. Furthermore,
there will be exercises assigned before the first class session which
will be due either electronically to the instructors or on the first day of class.
Thus, access to and ability to use WWW browsers will also be a requirement.
The course schedule is being significantly revamped this year, to increase the
emphasis of the first course upon demonstration of analytical abilities necessary
to complete the second half of the course. However, the first half of the course
also stands alone as a course in methods.
The accompanying schedule outlines our plans for coverage of the course material.
A more specific schedule, with detailed course coverage, will be provided the first
day of class.
Draft Course Schedule  Order Of Material To Be Covered Subject to Revision
 



Pre Assignment 1 
Basic Decision Trees
 



Pre Assignment 2 
Cost Modeling Data collection and preparation
 



Day 1 
Topic 1 
Introduction
to course perspective  decisionmaking
under uncertainty 

Topic 2 
Decision Trees
 structure and analysis (review of Pre Assignment) (RdN CH 16) 

Topic 3 
Bayes Theorem (Rdn Ch15)
& Value of
Information (RdN Ch 17)  Exercises/Problem Working Session 

Assignment 
Value of Information/Decision Tree Exercises 



Day 2 
Topic 1 
Cost Modeling Methods  Examples
and Practice 1 2
3 

Topic 2 
CostSkeleton Modeling
Framework 

Topic 3 
Discussion and Review of Pre Assignment 2  business model information 

Assignment 
Incorporation of Data From Pre Assignment 2 into Cost Model 



Day 3 
Topic 1 
Valuation  Value
Functions and Utility
Functions (RdN Ch 18) 

Topic 2 
Single Attribute
Utility Function Assessment  Lotteries (RdN Ch 19) 

Topic 3 
Working Session  Cost Model Development 

Assignment 
Utility Methods Problems 



Day 4 
Topic 1 
Review of Homework/Utility Exercises 

Topic 2 
Cost Modeling in Quantification of Risks; Sensitivity
Analysis  InClass Exercise: Writeup
and Cost Model (illustrative against your
own model) 

Topic 3 
Workshop in Cost Model Refinement/Preparation for Written Report 

Assignment 
Preparation for Exam 



Day 5 
Topic 1 
Dynamic Strategic Planning  Where
To From Here; Examples 1 & 2 

Topic 2 
Examination Period 

Topic 3 
Wrapup 



+1 week 
Written report on Cost Structure of Proposed Business  


Risks, Opportunities, Possible Business Developments 


Cost Analyses and discussion of potential 
Other materials that may be of interest/help