Bundle: Modern Business Statistics with Microsoft Office Excel, Loose-Leaf Version, 6th + MindTap Business Statistics, 2 terms (12 months) Printed Access Card
6th Edition
ISBN: 9781337589383
Author: David R. Anderson, Dennis J. Sweeney, Thomas A. Williams, Jeffrey D. Camm, James J. Cochran
Publisher: Cengage Learning
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Chapter 20.4, Problem 15E
In the following profit payoff table for a decision problem with two states of nature and three decision alternatives, the prior
| State of Nature | ||
| Decision Alternative | s1 | s2 |
| d1 | 15 | 10 |
| d2 | 10 | 12 |
| d3 | 8 | 20 |
- a. What is the optimal decision?
- b. Find the EVPI.
- c. Suppose that sample information I is obtained, with P(I | s1) = .20 and P(I | s2) = .75. Find the posterior probabilities P(s1 | I) and P(s2 | I). Recommend a decision alternative based on these probabilities.
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The following payoff table shows profit for a decision analysis problem with two decision alternatives and three states of nature.
Excel File: data20-01.xls
States of Nature
Dicision Alternative
81
82
83
250
100
25
da
100
100
75
a. Construct a decision tree for this problem.
$1
82
$3
81
da
82
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
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the optimal decision.
EV(dı) =
(to 1 decimal)
%3D
EV(d2) =
%3D
The optimal decision is
Select your answer- v
00
The following payoff table shows profit for a decision analysis problem with two decision alternatives and three states of nature.
DecisionAlternative
States of Nature
s1
s2
s3
d1
240
90
15
d2
90
90
65
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.
EV(d1) =
EV(d2) =
The optimal decision is ?
The following payoff table provides profits based on various possible decision alternatives and various levels of demand.
ALTERNATIVE
DEMAND
LOW
MEDIUM
HIGH
Alternative 1
40
80
150
Alternative 2
80
120
130
Alternative 3
100
100
100
a. Which alternative would a pessimist choose?
b. Which alternative would an optimist choose?
c. Which alternative should be chosen using the Hurwicz decision criterion with α = 0.4?
Chapter 20 Solutions
Bundle: Modern Business Statistics with Microsoft Office Excel, Loose-Leaf Version, 6th + MindTap Business Statistics, 2 terms (12 months) Printed Access Card
Ch. 20.2 - Prob. 1ECh. 20.2 - Prob. 2ECh. 20.2 - 3. Hudson Corporation is considering three options...Ch. 20.2 - 4. Myrtle Air Express decided to offer direct...Ch. 20.2 - 5. The distance from Potsdam to larger markets and...Ch. 20.2 - 6. Seneca Hill Winery recently purchased land for...Ch. 20.2 - 7. The Lake Placid Town Council has decided to...Ch. 20.3 - Consider a variation of the PDC decision tree...Ch. 20.3 - 9. A real estate investor has the opportunity to...Ch. 20.3 - Dante Development Corporation is considering...
Ch. 20.3 - 11. Hale’s TV Productions is considering producing...Ch. 20.3 - 12. Martin’s Service Station is considering...Ch. 20.3 - 13. Lawson’s Department Store faces a buying...Ch. 20.4 - Prob. 14ECh. 20.4 - 15. In the following profit payoff table for a...Ch. 20.4 - 16. To save on expenses, Rona and Jerry agreed to...Ch. 20.4 - 17. The Gorman Manufacturing Company must decide...Ch. 20 - Prob. 18SECh. 20 - 19. Warren Lloyd is interested in leasing a new...Ch. 20 - Hemmingway, Inc., is considering a $50 million...Ch. 20 - 21. Embassy Publishing Company received a...Ch. 20 - Case Problem Lawsuit Defense Strategy
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