HelpA decision maker has prepared the following payoff table.States of NatureAlternativeHighLowBuy85Rent7050Lease4555Prior Probability0.70.3Using Baye's Decision Rule, what is the best decision and the expected payoff? (Round your answer to 1 decimal place.)Best decisionPayoff4-

Decision Table Alternatives High Low Buy 85 5 Rent 70 50 Lease 45 55…

Answered: A decision maker has prepared the…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

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Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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The following payoff table shows profit for a decision analysis problem with two decision alternatives and three states of nature. Decision Alternative If S1 d₁ d₂ States of Nature then ? $1 240 90 90 15 The probabilities for the states of nature are P(S₁) = 0.65, P(s₂) = 0.15, and P(s3) = 0.20. (a) What is the optimal decision strategy if perfect information were available? ; If S₂ then ? 90 65 ; If S3 then ? (b) What is the expected value for the decision strategy developed in part (a)? î (c) Using the expected value approach, what is the recommended decision without perfect information? What is its expected value? The recommended decision without perfect information is ? EV = (d) What is the expected value of perfect information? EVPI = î
A manufacturing company must decide whether to manufacture a component part at its Milan, Michigan, plant or purchase the component part from a supplier. The resulting profit is dependent upon the demand for the product. The following payoff table shows the projected profit (in thousands of dollars). State of Nature Decision Low Alternative Demand $1 Medium Demand $2 High Demand 53 Manufacture, d -5 55 115 Purchase, d₂ 60 85 The state-of-nature probabilities are P(s₁) = 0.35, P(52) = 0.35, and P(53) = 0.30. (a) Use a decision tree to recommend a decision. The best decision is to purchase the component part. (b) Use EVPI to determine whether the company should attempt to obtain a better estimate of demand, assuming the estimate would come at no further cost. EVPI = 9 The EVPI suggests that the company should consider an attempt to obtain a better estimate of demand. (c) A test market study of the potential demand for the product is expected to report either a favorable (F) or…
Consider the following decision tree. Which decision, A or B, is best? What is the expected value of this decision? .40 $3,000 A B 2 .20 .80 OA, expected payoff = $2,000 OA, expected payoff = $2,120 OB, expected payoff = $1,800 OA, expected payoff = $2,100 .60 -$1,000 $2,500 $2,000 $1,800
( Use an excel sheet to show formulas used )
9
Lakewood Fashions must decide how many lots of assorted ski wear to order for its three stores. Information on pricing, sales, and inventory costs has led to the following payoff table, in thousands. Order size 1 lot 2 lots 3 lots (a) Show a regret table. Order size 1 lot 2 lots 3 lots 13 9 6 Low 13 9 6 Low Demand Medium 16 24 32 16 24 32 High 16 32 61 Demand Medium (b) What decision should be made by the optimist? O 1 lot O2 lots 3 lots 16 32 61 High Maximum Regret 2:06 PM
1. Kirsten is trying to decide where to go for her well-earned vacation. She would like to camp, but if the weather is bad, she will have to go to a motel. Given the costs and probabilities of bad weather given below, which destination should she choose? Camping cost Motel cost Probability of bad weather Nevada $21.2 $80.9 0.2 Oregon $15.9 $84.6 0.4 California $30 $95 0.1 a. California, because its EMV = $33.14 b. Nevada, because its EMV = $33.14 c. California, because its EMV = $36.5 d. Any of the 3 choices. e. Oregon, because its EMV = $43.38 f. Nevada, because its EMV = $43.38 g. None of the 3 choices. h. Oregon, because its EMV is $36.50.
A well-known plastic mould and die manufacturer in Toronto intends to expand internationally in anticipation of strong demand and expansion in the plastic die manufacturing sector. use the table beneath. Using the Maximax, Maximin, and equally likely conditions, assist the business in making the best option in an unclear situation. 0.5 for a highly favourable condition, 0.2 for an average demand, and 0.3 for an unfavourable state are the probabilities linked with the states of nature.a) Choose the course of action that will give Andrew the highest predicted monetary value (EMV).b) Determine the anticipated value of perfect information (EVPI).
An oil company must decide whether or not to drill an oil well in a particular area that they already own. The decision maker (DM) believes that the area could be dry, reasonably good or a bonanza. See data in the table which shows the gross revenues for the oil well that is found. Decision Drill $0 Abandon $0 Probability 0.3 Dry (D) Seismic Results No structure(N) Open(0) Closed (C) Drilling costs 40M. The company can take a series of seismic soundings (at a cost of 12M) to determine the underlying geological structure. The results will be either "no structure", "open structure or "closed structure". The reliability of the testing company is as follows that is, this reflects their historical performance. Reasonably good(G) $85 $0 0.3 Note that if the test result is "no structure" the company can sell the land to a developer for 50 m. otherwise (for the other results) it can abandon the drilling idea at no benefit to itself. Dry(d) 0.7 0.2 Bonanza(B) 0.1 $200 m SO 0.4 Conditional…
Build-Rite Construction has received favorable publicity from guest appearances on a public TV home improvement program. Public TV programming decisions seem to be unpredictable, so Build-Rite cannot estimate the probability of continued benefits from its relationship with the show. Demand for home improvements next year may be either low or high. But Build-Rite must decide now whether to hire more employees, do nothing, or develop subcontracts with other home improvement contractors. Build-Rite has developed the following payoff table:
2 true or false If the decision doesn’t involve risk and uncertainty, utility is the numerical score to measure the attractiveness of a course of action.
3

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A decision maker has prepared the following payoff table. States of Nature Alternative High Low Buy 85 Rent 70 50 Lease 45 55 Prior Probability 0.7 0.3 Using Baye's Decision Rule, what is the best decision and the expected payoff? (Round your answer to 1 decimal place.) Best decision Payoff