Calculate the loss table from the following payoff table: PAYOFF TABLE Action Events E1 E2 E3 E4 50 300 - 150 50 A2 400 100 Az - 50 200 100 A4 300 300 (b) Suppose that the probabilities of the events in this table are: P(E1) = 0.15; P (E2) = 0.45; P (E3) = 0.25; P (E4) = 0.15 Calculate the expected payoff and the expected loss of each action.
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- Find the expected value of this investment scheme. Profit/Loss Amount Probability -$6200 0.08 -$150 0.66 $4500 0.02 $2000 0.24The 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. 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 | s2) = 0.60 P(F | s3) = 0.60 P(U | s3) = 0.40 What is the efficiency of the information? If required, round your answer to one decimal place.Efficiency: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: $ 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 | s2) = 0.60 P(F | s3) =…
- 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. What is Gorman's optimal decision strategy?Decision strategy:If F then .If U then . What is the expected value of the market research information?Expected value: $ What is the efficiency of the information? If required, round your answer to one decimal place.Efficiency: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: $ f 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 | s2) = 0.60 P(F | s3) =…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) =…
- 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. 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 | s2) = 0.60 P(F | s3) = 0.60 P(U | s3) = 0.40 1. What is Gorman's optimal decision strategy?Decision strategy:If F then .If U then . 2. What is the expected value of the market…The Gorman Manufacturing Company must decide whether to manufacture a component part at its 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 ten thousand of pesos): state of nature state of nature state of nature Decision Alternative Low Demand S1 Medium DEmand S2 High demand S3 Manufacture, d1 -100 200 500 Purchase, d2 50 225 350 The state-of-nature probabilities are P(s1 ) = 0.35, P(s2 ) = 0.35, and P(s3) = 0.30. 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|S2)=0.60 P (F| S3) = 0.60 P (U|S3)=0.40 A. What is XY Manufacturing Company optimal decision strategy? B. What is the expected value of the market…The XY Manufacturing Company must decide whether to manufacture acomponent part at its 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 ten thousand of pesos): State of Nature State of Nature State of Nature Decision Alternative Low DemandS_(1) Medium DemandS_(2) High DemandS_(3) Manufacture, d_(1) -100 200 500 Purchase, d_(2) 50 225 350 The state-of-nature probabilities are P(s1) = 0.35, P(s2) = 0.35, and P(s3) = 0.30. a. Use a decision tree to recommend a decision. b. Use EVPI to determine whether XY Manufacturing Company should attempt to obtain a better estimate of demand. c. A test market study of the potential demand for the product is expected to reporteither a favorable (F) or unfavorable (U) condition. The relevant conditional probabilities are as follows:What is the probability that the market research report will be favorable?d. What…
- The XY Manufacturing Company must decide whether to manufacture acomponent part at its 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 ten thousand of pesos): State of Nature State of Nature State of Nature Decision Alternative Low DemandS_(1) Medium DemandS_(2) High DemandS_(3) Manufacture, d_(1) -100 200 500 Purchase, d_(2) 50 225 350 The state-of-nature probabilities are P(s1) = 0.35, P(s2) = 0.35, and P(s3) = 0.30. c. A test market study of the potential demand for the product is expected to reporteither a favorable (F) or unfavorable (U) condition. The relevant conditional probabilities are as follows:What is the probability that the market research report will be favorable?The XY Manufacturing Company must decide whether to manufacture acomponent part at its 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 ten thousand of pesos): State of Nature State of Nature State of Nature Decision Alternative Low DemandS_(1) Medium DemandS_(2) High DemandS_(3) Manufacture, d_(1) -100 200 500 Purchase, d_(2) 50 225 350 The state-of-nature probabilities are P(s1) = 0.35, P(s2) = 0.35, and P(s3) = 0.30. a. Use a decision tree to recommend a decision. b. Use EVPI to determine whether XY Manufacturing Company should attempt to obtain a better estimate of demand.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…
