Figure 12.13Generic decision treefor Exercise 12.4.(0.1)20(0.2)10(0.6)(0.1)-10(0.7)B(0.3) For the decision tree in Figure 12.13, assume Chance Events E and F are independent.a Draw the appropriate decision tree and calculate the EVPI for Chance Event E onlyb Draw the appropriate decision tree and calculate the EVPI for Chance Event F only.c Draw the appropriate decision tree and calculate the EVPI for both Chance Events Eand F: that is, perfect information for both E and F is available before a decision ismade.

Answered: For the decision tree in Figure 12.13,…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter9: Decision Making Under Uncertainty

Section9.2: Elements Of Decision Analysis

Problem 2P

See similar textbooks

Similar questions

In solving the given problem ,you may refer to the following payoff table: New bridge built No new bridge Alternative location A 1 14 for new warehouse B 2 10 C 4 6 1. Assume the payoffs represent profits. Determine the alternative that would be chosen under each of these decision criteria: A. Maximin B. Maximax C. Laplace 2. Using the information in the payoff table, develop a table of regrets, and then: A. Determine the alternative that would be chosen under minimax regret. B. Determine the expected value of perfect information using the regret table, assuming that the probability of a new bridge being built is 0.60. 3. Using the probabilities of 0.60 for a new bridge and 0.40 for no new bridge, compute the expected value for each alternative in the payoff table , and identify the alternative that would be selected under the expected-value approach. 4.…
Solve the following decision tree and create risk profiles and cumulative risk profiles for the alternatives defined by the original decision “A” and “B” using precisionTree. Which alternative is preferred? Explain.
Please use the payoff table (without the given prior probabilities) to answer the following questions: (d) Which alternative should be chosen under the Hurwicz (realism) criterion for α = 0.55?(e) Develop a regret table for this decision.(f) Which alternative should be chosen under the minimax regret criterion?
Adam has been offered to open up a Service station. However, the size of the establishment will be based on his decision. The annual return and investment required will be based on both size and market condition. To help out in the decision making, Adam has done the analysis and the expected profit/loss are shown in the table: Develop a decision table for this? What is the maximax decision? What is the equally likely decision? Develop a decision tree. Assume each outcome is equally likely, then find the highest expected monetory value (EMV).
Please use the payoff table (without the given prior probabilities) to answer the following questions: (a) Which alternative should be chosen under the maximax criterion? (b) Which alternative should be chosen under the maximin criterion? (c) Which alternative should be chosen under the equally-likely criterion? (d) Which alternative should be chosen under the Hurwicz (realism) criterion for α = 0.55? (e) Develop a regret table for this decision. (f) Which alternative should be chosen under the minimax regret criterion?
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 minimal 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?
The following payoff table provides profits based on various possible decision alternatives adn various levels of demand at Robert Klassan's print shop: decision low high alt 1 $10,000 $36,000 alt 2 $6,000 $38,000 alt 3 -$2500 $52,000 The probability of low demand is 0.40 whereas the probability of high demand is 0.60. a) The alternative that provides Robert the greatest expected monetary value is _________ The EMV for this decision is $_______ b) The expected value with perfect information (EVwPI)= $______ c) The expected value of perfect information (EVPI) for Robert= $________
Determine the course of action that has the highest expected payoff for this decision tree
Suppose you have a choice of three projects to choose from. Here the expected profits from these projects under the following economic scenarios: Project Poor/Fair Moderate/Stable Strong/Booming A -200 $400 $700 B -700 600 1200 C 100 500 900 Now suppose the probability of a Poor/Fair economy is 25%, a Moderate/Stableeconomy is 45% and there is a 30% chance for a Strong/Booming economy.A) Setup a decision tree.B) Determine the expected value (EV) for each project. What project shouldbe selected based on the expected value approach? Why?C) Determine the expected value with perfect information about the states ofnature?D) Determine the expected value without perfect information about the states ofnature?E) Determine the expected value of perfect information.
Dwayne Whitten, president of Whitten Industries, is considering whether to build a manufacturing plant in north Texas. His decision is summarized in the following table: Alternatives Favorable Market Unfavorable Market Build large plant $400,000 −$300,000 Build small plant $120,000 −$15,000 Don't Build $0 $0 Market Probability 0.40 0.60 a) The correct decision tree for Dwayne is shown in Figure ____ (all payoffs are in thousands). b) To maximize the return, Dwayne's decision should be to ______ . c) For Dwayne, the expected value of perfect information (EVPI) = $___________ (enter your answer as a whole num
Johnson Chemicals is considering two options for itssupplier portfolio. Option 1 uses two local suppliers. Each has a “unique-event” risk of 5%, and the probability of a “super-event” that would disable both at the same time is estimated to be 1.5%. Option 2 uses two suppliers located in different countries.Each has a “unique-event” risk of 13%, and the probability of a “super-event” that would disable both at the same time is esti-mated to be 0.2%. a) What is the probability that both suppliers will be disruptedusing option 1?b) What is the probability that both suppliers will be disruptedusing option 2?c) Which option would provide the lowest risk of a total shutdown?
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 8 7 Medium complex, d2 14 5 Large complex, d3 20 -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 $17.5 million and as long as the payoff for…

SEE MORE QUESTIONS

Recommended textbooks for you

Practical Management Science

Operations Management

ISBN:

9781337406659

Author:

WINSTON, Wayne L.

Publisher:

Cengage,

Practical Management Science

Operations Management

ISBN:

9781337406659

Author:

WINSTON, Wayne L.

Publisher:

Cengage,

SEE MORE TEXTBOOKS