K.S. School of Business Management (MIS) Complex Decisions & AI K.S. School of Business Management (MIS)

Why do you need Expert Systems? Diagnostic Problems Speed Consistency Training

Why do you need Expert Systems? Diagnostic Problems Situations are like symptoms Compare symptoms and diagnosis to situations and solutions Discuss: A firm uses a complex machine. For machine breakdowns, an engineer needs to be hired, coz he understands the problem language. The company wishes to expand to more locations => more machines More engineers too? Cost? Company wants to expand to international locations too! Even more engineers? Even more cost? Solution?

Expert System

Why do you need Expert Systems? Speed Faster, much more quicker responses Advantage situations? Stock markets! Market analysis – First mover’s advantage! Discuss Bank loans – Traditional versus via IS

Why do you need Expert Systems? Consistency Why is consistency important? Most business decisions are subject to a wide variety of non-discrimination laws! Discuss: Bank Loan case If an officer uses individual discretion to take a decision, what about being in line with corporate policies? Time taken to verify rules? Employee promotions and increments

Why do you need Expert Systems? Training All organizations must train employees Complex tasks and unstructured decisions Employees can take years to learn the rules and gain experience required to deal with problems Two features of expert systems help employees learn: Learn what questions need to be asked Be able to explain your answers (Why it reached a certain conclusion)

Another example of an Expert System Knowledge Base Symbolic & Numeric Knowledge Expert decisions made by non-experts Rules If income > 20,000 or expenses < 3000 and good credit history or . . . Then 10% chance of default

DSS versus ES DSS ES Goal Help user make a decision Provide Expert Advice Method Data – Model – Presentation Asks Questions, applies rules, explains Type of Problems General, limited by user models Narrow domain

Welcome to the Loan Evaluation System ES Example: Bank Loan Welcome to the Loan Evaluation System What is the purpose of the loan? car How much money will be loaned? 10,000 For how many years? 5 The current interest rate is 10%. The payment will be $212.47 per month. What is the annual income? 24,000 What is the total monthly payments of other loans? Why? Because the payment is more than 10% of the monthly income. What is the total monthly payments of other loans? 50.00 The loan should be approved, there is only a 2% chance of default.

Decision Tree: Bank Loan Payments < 10% monthly income? Other loans total < 30% Credit History Job Stability Approve the loan Deny No Yes Good Bad So-so Poor

Frame-based ES Rules Job History Customer Data Name ____ Address ____ Years at address__ Co-applicant___ Job History Employer, Salary, Date Hired ... Loan Details Purpose Boat Loan Amount _____ Time _____ Data for Boat Loans Length: Engine: Cost New: Cost Used: Recommendation Lend $$$$ at ___ interest rate for ___ months, with ___ initial costs. Rules