HelpSensitivity Analysis

Objective:

By the end of this lesson, you should be able to:

1. Identify and describe the use of sensitivity analysis as a technology assessment technique.

Sensitivity Analysis

Once an equation, model, or simulation is chosen to represent a given system, there is the question regarding which parts of that equation are the best predictors. Sensitivity analysis is “a general means to ascertain the sensitivity of system (model) parameters by making changes in important variables and observing their effects;” it is useful in impact analysis and policy analysis (Porter, et al., 1980).

Sensitivity analysis involves testing a model with different data sets to determine how different data and different assumptions affect a model.

"Sensitivity," here, is defined as “the ratio between the fractional change in a parameter that serves as a basis for decision to the fractional change in the simple parameter being tested” (Porter, et al., 1980).

For example: you've developed a model to predict personal computer sales. You have included a number of factors, such as the ratio of price for the average home computer system to the median income, the growth rate of the Internet, the average number of computers per school pupil in the schools, and a few other factors. Your model is pretty good with predictions based on the historical data you have supplied it with. You believe the ratio noted above is the most important factor, but by eliminating it from the model, the model gives the same results. It turns out that the sensitivity here is not as high as you had thought.

A terrific introduction to sensitivity analysis by Lucia Breierova and Mark Choudhari can be found at the following page (optional):
An Introduction to Sensitivity Analysis
http://www.scribd.com/doc/45752159/Sensitivity-Analysis

An example of sensitivity analysis can be seen at the following site:
www.colorado.edu/engineering/civil/cem/Faculty/doe/ou4/ou4.html#6

Mike Middleton has made available an add-in for Microsoft Excel on sensitivity analysis, with a user guide (recently, with a free trial download and for sale):
www.decisiontoolworks.com/ 


The Implications of Cost-Effectiveness Analysis of Medical Technology: Methodological Issues and Literature ReviewExamples of Sensitivity Analysis
in Technology Assessment

There are numerous examples of sensitivity analyses in technology assessment, such as the one on Page 50 of The Implications of Cost-Effectiveness Analysis of Medical Technology: Methodological Issues and Literature Review.

Other examples include:

www.princeton.edu/~ota/disk3/1975/7507/750708.PDF

www.princeton.edu/~ota/disk1/1992/9230/9230.PDF
(See Pages 79 - 81)

www.princeton.edu/~ota/disk3/1980/8017/801707.PDF
(Here, a cost sensitivity analysis is described.)
 


References Cited

Porter, A. L., Rossinni, F., Carpenter, S. R, Roper, A. T., Larson, R. W., and Tiller, J. S. (1980).A guidebook for technology assessment and impact analysis. New York: North Holland.



"Sensitivity Analysis"
All information is subject to change without notification.
© Jim Flowers
Department of Technology, Ball State University