The following payoff table shows profit for a decision analysis problem with two decision alternatives and three states of nature.DecisionAlternative=d₁d₂States of Nature5123080$2 $380580 55Suppose that the decision maker obtained the probabilities P(S₁) = 0.65, P(s₂) = 0.15, and P(S3) = 0.20. Use the expected value approach to determine the optimal decision.EV(d₁)EV(d₂)

EV for a decision alternate is equal to the sum of product of probability with states of nature…

Answered: The following payoff table shows profit…

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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Devise a solution for the problem under each of the four criteria of decisions under uncertainty.
The Gorman Manufacturing Company must decide whether to manufacture a component part at its Milan, Michigan, plant or purchase the component part from a supplier. The resulting profit is dependent upon the demand for the product. The following payoff table shows the projected profit (in thousands of dollars): State of Nature Low Demand Medium Demand High Demand Decision Alternative s1 s2 s3 Manufacture, d1 -20 40 100 Purchase, d2 10 45 70 The state-of-nature probabilities are P(s1) = 0.35, P(s2) = 0.35, and P(s3) = 0.30. Use a decision tree to recommend a decision.Recommended decision: Use EVPI to determine whether Gorman should attempt to obtain a better estimate of demand. EVPI: $ fill in the blank 3 A test market study of the potential demand for the product is expected to report either a favorable (F) or unfavorable (U) condition. The relevant conditional probabilities are as follows: P(F | s1) = 0.10 P(U | s1) = 0.90 P(F | s2) = 0.40 P(U |…
The following payoff table shows profit for a decision analysis problem with two decision alternatives and three states of nature. Decision Alternative d₁ d₂ = EV(d₁) EV(d₂) The optimal decision is ? States of Nature $1 $2 230 80 $3 80 5 Suppose that the decision maker obtained the probabilities P(S₁) = 0.65, P(S₂) = 0.15, and P(S3) = 0.20. Use the expected value approach to determine the optimal decision. 80 55
Calculating outcomes as equally likely would BEST describe: O a. Maximax criterion O b. Laplace criterion O c. Regret criterion Od. Maximin criterion Determining the average payoff for each alternative and choosing the one with the BEST payoff is the approach called: ea, maximax O b. minimax regret O c. laplace Od maximin M
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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?
No probabilities are known for the occurrence of the nature states. Compare the solutions obtained by each of the following criteria: Hurwitz (assume that alpha = 0.8)
Your company must decide whether to introduce a new product. The sales of the product will be either at a high (success) or low (failure) level. The conditional value for this decision is as follows Decision High Low Introduce $4,000,000 -$2,000,000 Do Not Introduce 0 0 Probability 0.3 0.7 You have the option to conduct a market survey to sharpen you market demand estimate. The survey costs $200,000. The survey provides incomplete information about the sales, with three possible outcomes: (1) predicts high sales, (2) predicts low sales, or (3) inconclusive. Such surveys have in the past provided these results Result High Low Predicts High 0.4 0.1 Inconclusive 0.4 0.5 Predicts Low 0.2 0.4 c) Draw the complete decision tree, including the survey option. Explain where the values on the decision tree come from
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