Consider the following payoff table for decisions D1 and D2.Monetary Outcomes02Probabilities of OutcomesDecision0103P1P2P3D1-10203025%50%25%D2-20204025%50%25%Suppose that the decision maker is risk averse. Select the most accuratestatement.O The decision maker is ambivalent between decisions D1 and D2.The EMV of decision D1 is different from the EMV of decision D2.O The decision maker will prefer D1 over D2.O The decision maker will prefer D2 over D1.The expected utility of both decisions is negative.

Name: Consider the following payoff table for decisions D1 and D2.Monetary
Uploaded: 2024-03-20T07:06:41.000Z
Channel: Bartleby
Description: Consider the following payoff table for decisions D1 and D2.Monetary Outcomes02Probabilities of OutcomesDecision0103P1P2P3D1-10203025%50%25%D2-20204025%50%25%Suppose that the decision maker is risk averse. Select the most accuratestatement.O The dec

The payoff table of decision D1 and D2 is, Decision O1 O2 O3 P1 P2 P3 D1 -10 20 30 25% 50%…

Math

Probability

Consider the following payoff table for decisions D1 and D2. Probabilities of Outcomes Monetary Outcomes 01 02 P3 Decision D1 03 P1 P2 -10 20 30 25% 50% 25% D2 -20 20 40 25% 50% 25% Suppose that the decision maker is risk averse. Select the most accurate statement.

Consider the following payoff table for decisions D1 and D2. Probabilities of Outcomes Monetary Outcomes 01 02 P3 Decision D1 03 P1 P2 -10 20 30 25% 50% 25% D2 -20 20 40 25% 50% 25% Suppose that the decision maker is risk averse. Select the most accurate statement.

A First Course in Probability (10th Edition)

10th Edition

ISBN:9780134753119

Author:Sheldon Ross

Publisher:Sheldon Ross

Chapter1: Combinatorial Analysis

Section: Chapter Questions

Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...

See similar textbooks

Similar questions

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?
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…
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 ?
A company is facing three types of decisions for the purchasing of a seasonal product. The protprojection may depend on the demand level. The payos 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 re-garding 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(s1jE)=0.34; P(s1jV)=0.2P(s2jE)=0.32; P(s2jV)=0.26; 1 ) Suppose that the prior probability of low demand is always fixed to 0.4, give a sensitivityanalysis on the other probabilities and give different scenarios with a graphic.
For the following payoff table, the probability of event 1 is 0.8, the probability of event 2 is 0.1, and the probability of event 3 is 0.1 ACTION ACTION EVENT A ($) B ($) 1 50 10 2 300 100 3 500 200 1. Compute the coefficient of variation for action A 2. Compute the coefficient of variation for action B 3. Determine the optimal action based on the maximin criterion
Consider an economy with two states of nature and one time period. An option pays $3 in state 1 and $0 in state 2, and is being traded for the price of $1. A forward contract pays $3 in state 1 and -$2 in state 2. Using this information, compute the risk-free rate and the risk-neutral probabilities for each state of nature.
Following is the payoff table for the Pittsburgh Development Corporation (PDC) Condominium Project. Amounts are in millions of dollars. State of Nature Decision Alternative Strong Demand S1 Weak Demand S2 Small complex, d1 9 8 Medium complex, d2 13 3 Large complex, d3 19 -9 Suppose PDC is optimistic about the potential for the luxury high-rise condominium complex and that this optimism leads to an initial subjective probability assessment of 0.8 that demand will be strong (S1) and a corresponding probability of 0.2 that demand will be weak (S2). Assume the decision alternative to build the large condominium complex was found to be optimal using the expected value approach. Also, a sensitivity analysis was conducted for the payoffs associated with this decision alternative. It was found that the large complex remained optimal as long as the payoff for the strong demand was greater than or equal to $16 million and as long as the payoff for the weak demand was greater…
Hudson Corporation is considering three options for managing its data processing operation: continue with its own staff, hire an outside vendor to do the managing (referred to as outsourcing), or use a combination of its own staff and an outside vendor. The cost of the operation depends on future demand. The annual cost of each option (in thousands of dollars) depends on demand as follows: a. If the demand probabilities are .2, .5,and .3, which decision alternative will minimize the expected cost of the data processing operation? What is the expected annual cost associated with your recommendation? b. What is the expected value of perfect information?
Given the following payoff table with the profits ($m), a firm might expect alternative investments (A, B, C) under different levels of interest rate (attached) (a) Which alternative should the firm choose under the maximax criterion? (b) Which option should the firm choose under the maximin criterion? (c) Which option should the firm choose under the LaPlace criterion? (d) Which option should the firm choose with the Hurwicz criterion with α = 0.2? (e) Using a minimax regret approach, what alternative should the firm choose? (f) Economists have assigned probabilities of 0.35, 0.3, and 0.35 to the possible interest levels 1, 2, and 3 respectively. Using expected monetary values, what option should be chosen and what is that optimal expected value? (g) What is the most that the firm should be willing to pay for additional information? Use Expected Regret (h) Use the alternative method to verify EVPI
5) A payoff table is given as s1 s2 s3 d1 250 750 500 d2 300 -250 1200 d3 500 500 600 (a) What choice should be made by the optimistic decision maker? (b) What choice should be made by the conservative decision maker? (c) What decision should be made under minimax regret? (d) If the probabilities of d1, d2, and d3 are .2, .5, and .3, respectively, then what choice should be made under expected value?
Consider the following payoff matrix.
Consider the following profit payoff table. The prior probabilities for s1 and s2 are P(s1)=0.8 and P(s2)=0.2. States 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)=0.20 and P(I|s2)=0.75. Find the posterior probabilities P(s1|I) and P(s2|I). Recommend a decision alternative based on these probabilities.