Warwick MBA

Modelling and Analysis for Management

Specimen Answers Being sure the model is right

Self Assessed Assignment

For each of the case studies that you have worked on during this module (Amore Frozen Foods,
Waite First Securities, Ohio Polymer Inc. and Red Brand Canners) give consideration to the
issue of model validity.
1. What methods of model validation could be employed to increase confidence in each of the
models?
2. How accurate do you consider each model to be, and were they valid?
Answers to Self Assessed Assignment
Below are some suggestions on the ways in which the models used in each case study could be
validated.
Amore Frozen Foods
Conceptual Model Validation: because the underlying model is well established in statistical
theory then the validity of the conceptual model can be accepted.
Data Validation: the extent to which the data meets the assumptions behind the conceptual
model should be questioned e.g. is the sampling procedure correct?
Verification: if the model has been developed in Excel, all the data and formulae need to be
checked.
Black-box Validation: is the rejection rate predicted by the model similar to that in the realworld?
Solution Validation: if a new fill level is employed, then the actual quality level achieved should
be compared to that predicted by the model.
Waite First Securities
Conceptual Model Validation: what is the meaning of the beta values and the residuals?
Data Validation: the data is probably very reliable, but it should be questioned whether there are
time based effects in the data (i.e. the relationship between the stocks and the market varies over
time) since this would affect the validity of the model.
Verification: if the model has been developed in Excel, check the data input to the spreadsheet
and investigate the reliability of Excel for regression analysis.
Solution Validation: do the stocks behave as the model predicts?
Ohio Polymer Inc.
Conceptual Model Validation: are any vital elements of the real-world situation missing from the
model?
Verification: check the data and functions coded in Excel.
Data Validation: the data is probably reliable, but some effort should go into determining the
source of the data and checking whether the data are correct.

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White-box Validation: demonstrate the model to Ohio Polymer with a view to checking that all
details in the model are correct.
Black-box Validation: compare the daily spot purchase results (when no contract gas is
purchased) with historic data.
Experimentation Validation: check that the warm-up period removes any initial bias and that
enough replications are performed to obtain a sufficiently accurate result.
Solution Validation: are the outcomes, in terms of spot purchase and flare, as predicted by the
model once a contract for gas has been set-up?
Red Brand Canners
Conceptual Model Validation: because the underlying model (Linear Programming) is well
established, then the validity of the conceptual model can be accepted.
Verification: check the data and functions coded in Excel.
Data Validation: although the data are probably reliable some questions should be raised e.g.
how firm are the constraints and how should the fruit cost be accounted for?
White-box Validation: demonstrate the model to Red Brand Canners with a view to checking that
all details in the model are correct.
Solution Validation: are the outcomes, in terms of actual profitability, as predicted by the model.

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