Essentials of Business Analytics (MindTap Course List)
2nd Edition
ISBN: 9781305627734
Author: Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher: Cengage Learning
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Textbook Question
Chapter 15, Problem 13P
The following profit payoff table was presented in Problem 1:
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?
- 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?
- d. What is the expected value of perfect information?
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The following profit payoff table was presented in Problem 1:
State of Nature
Decision Alternative
d,
d,
250
100
25
100
100
75
The probabilities for the states of nature are P(sj) = 0.65, P(s2) = 0.15, and P(s3) = 0.20.
a. What is the optimal decision strategy if perfect information were available?
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?
d. What is the expected value of perfect information?
The following payoff table shows profit for a decision analysis problem with two decision alternatives and three states of nature:
State of Nature
Decision Alternative S1
S2 S3
di
250 100 100
d2
200 100 150
The probabilities for the states of nature are P(s1) = 0.45, P(s2) = 0.25, and P(53) = 0.3.
(a) What is the optimal decision strategy if perfect information were available?
S1 : - Select your answer - V
S2
Select your answer -
S3 : - Select your answer - V
(b) What is the expected value for the decision strategy developed in part (a)? If required, round your answer to one decimal place.
(c) Using the expected value approach, what is the recommended decision without perfect information?
- Select your answer - v
What is its expected value? If required, round your answer to one decimal place.
(d) What is the expected value of perfect information? If required, round your answer to one decimal place.
A company is facing three types of decisions for the purchasing of a seasonal product. The profitprojection may depend on the demand level. The payoffs for the situations are given in the followingtable:DemandDecision High (s1) Medium (s2) Low (s3)d1 60 60 50d2 80 80 30d3 100 70 101. If the prior probabilities are 0.3, 0.3, and 0.4, respectively, what is the recommended decision?Show all the calculations and answer with a decision tree.2. At each preseason sales meeting, the vice president of sales provides a personal opinion regarding potential demand for the product. The prediction of the vice president have alwaysbeen either excellent (E) or very good (G). Posterior probabilities are as follows.P(V)=0.7; P(E)=0.3P(s1|E)=0.34; P(s1|V)=0.2P(s2|E)=0.32; P(s2|V)=0.26;Use a decision tree to give the optimal decision strategy.43. Give the EVPI and the EOL, and EVSI.4. Suppose that the prior probability of a low demand is always fixed to 0.4, give a sensitivityanalysis on the other…
Chapter 15 Solutions
Essentials of Business Analytics (MindTap Course List)
Ch. 15 - Prob. 1PCh. 15 - Southland Corporation’s decision to produce a new...Ch. 15 - Amy Lloyd is interested in leasing a new Honda and...Ch. 15 - Investment advisors estimated the stock market...Ch. 15 - Hudson Corporation is considering three options...Ch. 15 - Prob. 6PCh. 15 - Myrtle Air Express decided to offer direct service...Ch. 15 - Video Tech is considering marketing one of two new...Ch. 15 - Seneca Hill Winery recently purchased land for the...Ch. 15 - Hemmingway, Inc. is considering a $5 million...
Ch. 15 - The following profit payoff table was presented in...Ch. 15 - Suppose that you are given a decision situation...Ch. 15 - A firm has three investment alternatives. Payoffs...Ch. 15 - Alexander Industries is considering purchasing an...Ch. 15 - In a certain state lottery, a lottery ticket costs...Ch. 15 - Three decision makers have assessed utilities for...Ch. 15 - In Problem 22, if P(s1) = 0.25, P(s2) = 0.50, and...Ch. 15 - Translate the following monetary payoffs into...Ch. 15 - Consider a decision maker who is comfortable with...
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