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Practical Management Science

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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The following payoff table shows profit for a decision analysis problem with two decision alternatives and three states of nature.
Decision
Alternative
d₁
d₂
States of Nature
51 52 $3
230 80 5
80
80 55
Suppose that the decision maker obtained the probabilities P(5₁) = 0.65, P(S₂) = 0.15, and P(53) = 0.20. Use the expected value approach to determine the optimal decision.
EV(d₂) =
EV(d₂) =
The optimal decision is?.

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