Assume you are faced with three decision alternatives and two states of nature whose profit payoff table is shown below. Decision Alternative State of Nature 1 State of Nature 2 Decision 1 26 32 Decision 2 40 18 Decision 3 28 25 The probability of state of nature 1 is .42. Required: (Show detail computations) a. Determine the expected value of each alternative. b. Which decision is optimal. c. Determine the expected value with perfect information. d. Compute the expected value of perfect information. a. Determine the expected value of each alternative. b. Which decision is the optimal decision? c. Determine the expected value with perfect information. d. Compute the expected value of perfect information.
Assume you are faced with three decision alternatives and two states of nature whose profit payoff table is shown below. Decision Alternative State of Nature 1 State of Nature 2 Decision 1 26 32 Decision 2 40 18 Decision 3 28 25 The probability of state of nature 1 is .42. Required: (Show detail computations) a. Determine the expected value of each alternative. b. Which decision is optimal. c. Determine the expected value with perfect information. d. Compute the expected value of perfect information. a. Determine the expected value of each alternative. b. Which decision is the optimal decision? c. Determine the expected value with perfect information. d. Compute the expected value of perfect information.
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter9: Decision Making Under Uncertainty
Section9.4: The Precision Tree Add-in
Problem 9P
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Question
Assume you are faced with three decision alternatives and two states of nature whose profit payoff table is shown below.
|
Decision Alternative |
State of Nature 1 |
State of Nature 2 |
|
Decision 1 |
26 |
32 |
|
Decision 2 |
40 |
18 |
|
Decision 3 |
28 |
25 |
The probability of state of nature 1 is .42.
Required: (Show detail computations)
a. Determine the expected value of each alternative.
b. Which decision is optimal.
c. Determine the expected value with perfect information.
d. Compute the expected value of perfect information.
|
a. |
Determine the expected value of each alternative. |
|
b. |
Which decision is the optimal decision? |
|
c. |
Determine the expected value with perfect information. |
|
d. |
Compute the expected value of perfect information. |
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