(a) What choice should be made by the optimistic decision maker? (b) What choice should be made by the conservative decision maker? (c) What decision should be made under minimal regret?
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A payoff table is given as:
|
S1 |
S2 |
S3 |
D1 |
250 |
750 |
500 |
D2 |
300 |
-250 |
1200 |
D3 |
500 |
500 |
600 |
(a) What choice should be made by the optimistic decision maker?
(b) What choice should be made by the conservative decision maker?
(c) What decision should be made under minimal regret?
(d) If the probabilities of d1, d2, and d3 are .2, .5, and .3, respectively, then what choice should be made under expected value?
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- You are given the following payoff table (in units of thousands of dollars) for a decision analysis problem: S1 220 S2 170 S3 A1 110 A2 200 150 180 Prior Probability 0.5 0.4 0.1 (a) Which alternative should be chosen under the maximin payoff criterion? (b) Which alternative should be chosen under the maximum likelihood criterion? (c)Which alternative should be chosen under Bayes' decision rule?Decision Tree Analysis. You are considering the decision to purchase a machine for internal production or to subcontract the work to an external source. The following information has been provided by your financial managers: Cost to purchase the machine—$35,000 Cost to subcontract the work—$5,000 Probability of a good market = 70% Probability of a poor market = 30% Reward if the prediction occurs: In the purchase machine decision good market scenario—$80,000; in the poor market scenario—$30,000 In the Subcontract decision good market scenario—$50,000; in the poor market scenario—$15,000 1. What is the expected value of the decision to purchase the machine?A decision maker is looking to minimising costs through three alternative decisions a1 , b2 and c3 under two states of nature/events S1 and S2 with S2 having a probability of 30% . For a1 payoffs for s1 K100 million and s2 K540 million For a2 payoff for s1 K150 million and s2 –K50 million For a3 payoff for s1 K350 million and s2 K320 million Find EMV and recommend the course of action Find the EMV under certainty Use the EVC to find the EVPI Determine the opportunity loss table Find the course of action that minimises EOL Compare the minimum EOL with the EVPI.