D F 1 Decision 1 Decision 2 Decision 3 Payoff/Cost Probability $50,000 $10,000 -$5,000 Payoff/Cost Probability $5,000 -$1,000 Payoff/Cost Probability $3,000 2 3 0.1 0.6 1 0.2 0.4 5 0.7 7 EMV $3,500 EMV $2,600 EMV $3,000

A First Course in Probability (10th Edition)
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ISBN:9780134753119
Author:Sheldon Ross
Publisher:Sheldon Ross
Chapter1: Combinatorial Analysis
Section: Chapter Questions
Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...
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  1. Could you please solve the following problem using excel. Besidesthemaximin,maximax,andEMVcriteria,thereareotherpossiblecriteriaformaking decisions. One possibility involves regret. The idea behind regret is that if you make any decision and then some outcome occurs, you look at that outcome’s column in the payoff table to see how much more you could have made if you had chosen the best payoff in that column. For example, if the decision you make and the outcome you observe lead to a $50 payoff, and if the highest payoff in this outcome’s column is $80, then your regret is $30. You regret looking back and seeing how much more you could have made, if only you had made a different decision. Therefore, you calculate the regret for each cell in the payoff table (as the maximum payoff in that column minus the payoff in that cell), calculate the maximum regret in each row, and choose the row with the smallest maximum regret. This is called the minimax regret criterion.

    Apply this criterion to the example in Simple Decision Problem.xlsx. Which decision do you choose?

A
B
D
G
H
1 Decision 1
Payoff/Cost Probability
$50,000
$10,000
-$5,000
Decision 2
Decision 3
Payoff/Cost Probability
$5,000
-$1,000
2
Payoff/Cost
Probability
3
0.1
0.6
$3,000
1
0.2
0.4
5
0.7
6.
7 EMV
$3,500
EMV
$2,600
EMV
$3,000
Transcribed Image Text:A B D G H 1 Decision 1 Payoff/Cost Probability $50,000 $10,000 -$5,000 Decision 2 Decision 3 Payoff/Cost Probability $5,000 -$1,000 2 Payoff/Cost Probability 3 0.1 0.6 $3,000 1 0.2 0.4 5 0.7 6. 7 EMV $3,500 EMV $2,600 EMV $3,000
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