You are given the following payoff table (in units of thousands ofdollars) for a decision analysis problem:S1220S2170S3A1110A2200150180Prior Probability0.50.40.1(a) Which alternative should be chosen under the maximin payoffcriterion?(b) Which alternative should be chosen under the maximum likelihoodcriterion?(c)Which alternative should be chosen under Bayes' decision rule?

The payoff table is given in order along with the prior probability and the decision as per the…

Answered: (a) Which alternative should be chosen…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

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

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Come up with a decision using each of the different criteria under conditions of uncertainty using the table below. The payoff values are expressed as LOSSES and alpha = 0.5 * (a) What is the best of the best payoff value? (b) Which decision alternative has the best of the worst payoff value? (c) Which decision alternative has the minimum payoff value of the maximum regret? (d) Which realism approach decision alternative has the maximum payoff?(e) What is the best equally likely decision to take?
This is the same payoff table used in questions 2 and 3. Below is a payoff table that lists four mortgage options: Decision 1-year ARM 3-year ARM 5-year Arm 30-year fixed Rates Rise $66,645 $62,857 $55,895 $52,276 Outcomes Rates Stable $43,650 $47,698 $50,894 $52,276 4) Which of the following decisions has the best average payoff? CA. 3-year ARM B. 1-year ARM CC. 5-year ARM CD. 30-year Fixed Rates Fall $38,560 $42,726 $48,134 $52,276
Wired & Plugged specializes in manufacturing modern electronic components. It also builds equipment that produces the components. The marketing and production directors advised the president about a proposed manufacturing facility in the form of a payoff table as shown. Decision Profits($) Strong Marked Fair Market Poor Market Large-sized facility Medium-sized facility Small- sized facility No facility 450,000 2500,000 350,000 0 220,000 150,000 150,000 0 -310,000 -250,000 -80,000 0 What decision should be made using the LaPlace criterion?
Use the table below to answer the questions that follow and caculate the Expected Monetary Value(EMV) of the different outcomesDECISION TABLE WITH CONDITIONAL VALUESSTATE OF NATUREFAVORABLE OUTCOME UNFAVORABLE OUTCOMEALTERNATIVES ($) ($)Start a big Company 2,000,000 -500,000Start a small company 800,000 -200,000Build Nothing 0 0Probabilities 0.3 0.7Calculate the following The EMV Maximin criterion Maximax criterion Minimax criterion
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Suppose the city introduces a disposal tax and any unsold games must now be disposed of at a cost of €1 each. What is the company’s expected profit if it produces 1800 board games?
A salesperson uses three different airlines. The probabilities of switching from one airline to another in consecutive flights are shown below. If the last flight was on Delta, what is the probability that the next was on American? American Delta Southwest American 0.5 0.25 0.25 Delta 0.2 0.6 0.2 Southwest 0.3 0.3 0.4 A 0.5 B 0.2 C 0.25 D 0.6
You are planning to rent a car for a one-week vacation. You have the option of buying an insurance that costs $80 dollars for a week. If you do not purchase insurance, you would be personally liable for any damages. You anticipate that a minor collision will cost $2,000, whereas a major accident might cost $16,000 in repairs. Develop a payoff table for this situation. What decision should you make using each strategy? Aggressive (Optimistic) Conservative (Pessimistic) Opportunity Loss You have recently read in a magazine that that the probability of a major accident is 0.05% and that the probability of a minor collision is 0.18%. Construct a decision tree and identify the best expected value decision.
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Imagine that you have the following pair of concurrent decisions. First examine both decisions, then indicate the options you prefer. Decision 1: Choose betweenA a sure loss of 1500B a 75% to lose £2000 and 25% chance to lose nothing Decision 2: Choose betweenC a sure gain of £480D a 25% chance to gain £2000 and 75% chance to gain nothing How do you think respondents in a laboratory experiment would decide in Decision 1 and Decision 2? most participants will choose 1B and 2C most participants will choose 1A most participants will choose 1B and 2D most participants will choose 1A and 2D 2) Which of the following can explain the behavior in the lab for decision 1? preference for certainty underestimation of large probabilities individuals are risk loving in the loss domain overweighting of small probabilities concavity of the value function in the gain domain 2. individuals are risk loving in the loss domain

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(a) Which alternative should be chosen under the maximin payoff criterion? (b) Which alternative should be chosen under the maximum likelihood criterion?