The following payoff table shows the profit for a decision problem with two states of nature and two decision alternatives.Decision AlternativeState of Nature51d₂d2(a) Use graphical sensitivity analysis to determine the range of probabilities of state of nature s, for which each of the decision alternatives has the largest expected value.d:is optimal for p(s₂) ≤ 0.2857; d. ✓ is optimal for p(s₂) > 0.28571252635(b) Suppose P(s) = 0.2 and P(5₂) = 0.8. What is the best decision using the expected value approach?The best decision is d:with an expected value of 5.2(c) Perform sensitivity analysis on the payoffs for decision alternative d₁. Assume the probabilities are as given in part (b), and find the range of payoffs under states of natures, and s₂ that will keep the solution found in part (b) optimal.As long as the payoff for s, is --?--, then d₂ will be optimal.As long as the payoff for s₂ is --?--Is the solution more sensitive to the payoff under state of nature s₁ or 5₂?0 5₁0 $₂Fthen d₂ will be optimal.

Given details:Decision AlternativeState of NatureS1S2d1123d265

Answered: The following payoff table shows the…

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 a profit for a decision analysis problem with two decision alternatives and three states of nature. In order to get full credit, show your all work done step by step including cell calculations using excel functions. State of Nature Decion Alternatives s1 s2 s3 d1 250 100 50 d2 100 75 100 a) Construct a decision tree for this problem. b) Suppose that the decision-maker obtains 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.
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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 If S1 d₁ d₂ States of Nature then ? $1 240 90 90 15 The probabilities for the states of nature are P(S₁) = 0.65, P(s₂) = 0.15, and P(s3) = 0.20. (a) What is the optimal decision strategy if perfect information were available? ; If S₂ then ? 90 65 ; If S3 then ? (b) What is the expected value for the decision strategy developed in part (a)? î (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 = î
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