Sensitivity Analysis for Decision Models

Decoding Decision Modeling

Tiago Brasil

Lead Data Engineer

Sensitivity Analysis for Decision Models

A white rectangle with a white outline to facilitate the slide formating. Sensitivity analysis is a technique in decision modeling to examine how changes in input variables impact the output or outcomes of the model.

This strategy enables:

Variable examination
Scenario testing
Decision support

A white rectangle with a white outline to facilitate the slide formating Four gray arrows with different sizes pointing randomly on top of a red circle with a level adjustment icon in it

Exploring Sensitivity Analysis

Sensitivity Analysis helps identify which inputs have the most significant influence on the decision outputs and to what extent.

Icon with to green arrows, one pointing up and the other pointing down

Exploring Sensitivity Analysis

Sensitivity Analysis helps identify which inputs have the most significant influence on the decision outputs and to what extent.

Icon of a horizontal volume control

Exploring Sensitivity Analysis

Sensitivity Analysis helps identify which inputs have the most significant influence on the decision outputs and to what extent.

Icon of a magnifying glass on a stack of paper with a bar graph on it

Exploring Sensitivity Analysis

Sensitivity Analysis helps identify which inputs have the most significant influence on the decision outputs and to what extent.

Icon of a yellow light bulb

Applying Sensitivity Analysis

Two executives at the Mattress King are text messaging about the sales strategy:

Illustration of a cell phone in horizontal position showing a chat message from the ceo

Applying Sensitivity Analysis

Two executives at the Mattress King are text messaging about the sales strategy:

Illustration of a cell phone in horizontal position showing a chat message from the cto

Applying Sensitivity Analysis

Two executives at the Mattress King are text messaging about the sales strategy:

Illustration of a cell phone in horizontal position showing a chat message from the ceo

Identifying inputs and outputs

A white rectangle with a white outline to facilitate the slide formating Influence diagram showing the factors involved in the decision. The objective (Profit) is highlighted as well as the functions costs, sales and prices

Illustration of a cell phone in vertical position showing a chat conversation between the ceo and the cto

Identifying inputs and outputs

A white rectangle with a white outline to facilitate the slide formating Influence diagram showing the factors involved in the decision. The cost function is highlighted as well as the influencing functions cost per unit, store rent and payroll

Classifying variables

A white rectangle with a white outline to facilitate the slide formating Table showing the fixed variables and each of their costs

Classifying variables

A white rectangle with a white outline to facilitate the slide formating Table showing the floating variables and each of their values

Classifying variables

A white rectangle with a white outline to facilitate the slide formating A gray rectangle with the mathematical expression of profit = mattress price times mattress sold minus payroll plus store rent plus cost per mattress times mattress sold

Defining ranges of variables

Table with the value of the profit based on the price and the number of mattresses sold. The values $150 and 1,000 are highlighted

Defining ranges of variables

A white rectangle with a white outline to facilitate the slide formating Table with the value of the profit based on the price and the number of mattresses sold. The values $150, 1,000 and 40,000 are highlighted

A gray rectangle with the mathematical expression of profit = mattress price times mattress sold minus payroll plus store rent plus cost per mattress times mattress sold

Defining ranges of variables

A white rectangle with a white outline to facilitate the slide formating A table highlighting the prices ranging from $75 to $200 on the left hand size and the units of mattresses sold on the top line

A gray rectangle with the mathematical expression of profit = mattress price times mattress sold minus payroll plus store rent plus cost per mattress times mattress sold

Calculating the impact of variables

The complete table showing all the values given the price and the number of mattresses sold. The table is colored in red, white and green to represent the low, medium and high values respectly

Generating conclusions and insights

The complete table showing all the values given the price and the number of mattresses sold. The table is colored in red, white and green to represent the low, medium and high values. The values $175, 800 and 40,000 are highlighted

Text box with the conclusion about increasing the price to $175

Generating conclusions and insights

Text box with the conclusion about increasing the price to $200

Generating conclusions and insights

Text box with the conclusion about decreasing the price to $125

Generating conclusions and insights

Text box with the conclusion about decreasing the price to $100

Let's practice!

Decoding Decision Modeling