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 $1 240 90 $₂ $3 90 15 90 65 The probabilities for the states of nature are P(S₁) = 0.65, P(s₂) = 0.15, and P(s) = 0.20. (a) What is the optimal decision strategy if perfect information were available? If s₁ then ? ; If s₂ then ? ; If S3 then ? (b) What is the expected value for the decision strategy developed in part (a)? (c) Using the expected value approach, what is the recommended decision without perfect information? What is its expected value? The recommended decision without perfect information is ? EV = (d) What is the expected value of perfect information? EVPI =
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 $1 240 90 $₂ $3 90 15 90 65 The probabilities for the states of nature are P(S₁) = 0.65, P(s₂) = 0.15, and P(s) = 0.20. (a) What is the optimal decision strategy if perfect information were available? If s₁ then ? ; If s₂ then ? ; If S3 then ? (b) What is the expected value for the decision strategy developed in part (a)? (c) Using the expected value approach, what is the recommended decision without perfect information? What is its expected value? The recommended decision without perfect information is ? EV = (d) What is the expected value of perfect information? EVPI =
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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