Question Workspace The following payoff table shows the profit for a decision problem with two states of nature and two decision alternatives: State of NatureDecision Alternatives1s2d1101d263 (a)Suppose P(s1)=0.2 and P(s2)=0.8. What is the best decision using the expected value approach? Round your answer in one decimal place. The best decision is decision alternative , with an expected value of . (b)Perform sensitivity analysis on the payoffs for decision alternative d1. Assume the probabilities are as given in part (a), and find the range of payoffs under states of nature s1 and s2 that will keep the solution found in part (a) optimal. Is the solution more sensitive to the payoff under state of nature s1 or s2? Round your answer in two decimal places. The solution is more sensitive to , as an increment of for d1(s2) causes a break even between the decision alternatives, whereas it takes an increment of , to provide the same effect for d1(s1).

Name: Question Workspace The following payoff table shows the profit for a
Uploaded: 2024-03-20T07:06:41.000Z
Channel: Bartleby
Description: Question Workspace The following payoff table shows the profit for a decision problem with two states of nature and two decision alternatives: State of NatureDecision Alternatives1s2d1101d263 (a)Suppose P(s1)=0.2 and P(s2)=0.8. What is the best de

Decision alternative s1 s2 P(s1)= 0.2 d1 10 1 P(s2)= 0.8 d2 6 3

Answered: Question Workspace The following…

A First Course in Probability (10th Edition)

10th Edition

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...

See similar textbooks

Related questions

Concept explainers

Topic Video

Question

100%

Question Workspace

The following payoff table shows the profit for a decision problem with two states of nature and two decision alternatives:

	State of Nature
Decision Alternative	s₁	s₂
d₁	10	1
d₂	6	3

(a)	Suppose P(s₁)=0.2 and P(s₂)=0.8. What is the best decision using the expected value approach? Round your answer in one decimal place.

	The best decision is decision alternative , with an expected value of .

(b)	Perform sensitivity analysis on the payoffs for decision alternative d₁. Assume the probabilities are as given in part (a), and find the range of payoffs under states of nature s₁ and s₂ that will keep the solution found in part (a) optimal. Is the solution more sensitive to the payoff under state of nature s₁ or s₂? Round your answer in two decimal places.

	The solution is more sensitive to , as an increment of for d₁(s₂) causes a break even between the decision alternatives, whereas it takes an increment of , to provide the same effect for d₁(s₁).

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

$Discrete Probability Distributions$

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, probability and related others by exploring similar questions and additional content below.