Mazen is not keen on collecting facts and information while solving problems. He is spontaneous in decision making and usually chooses the first possible alternative that comes to his attention, and he provides an acceptable solution to a given problem. The type of decision being made by Mazen in such situations is known as a(n)

Mazen is not keen on collecting facts and information while solving problems. He is spontaneous in decision making and usually chooses the first possible alternative that comes to his attention, and he provides an acceptable solution to a given problem. The type of decision being made by Mazen in such situations is known as a(n)

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter9: Decision Making Under Uncertainty

Section9.6: The Role Of Risk Aversion

Problem 28P

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The model in Example 9.3 has only two market outcomes, good and bad, and two corresponding predictions, good and bad. Modify the decision tree by allowing three outcomes and three predictions: good, fair, and bad. You can change the inputs to the model (monetary values and probabilities) in any reasonable way you like. Then you will also have to modify the Bayes rule calculations. You can decide whether it is easier to modify the existing tree or start from scratch with a new tree.
Select the least accurate statement. A) The expected monetary value (EMV) criterion represents the long-run average of uncertain outcomes, so it should only be used for recurring decisions. b) For each possible decision and each possible outcome, the payoff table lists the associated monetary value. c)The certainty equivalent is the certain dollar amount a risk-averse decision maker would accept in order to avoid a gamble altogether. D) For a risk-averse decision maker, the certainty equivalent is less than the expected monetary value (EMV).
1) A decision maker using an exponential utility function would prefer a random payoff with an expected value of X to a certain payoff of X. True False 2) In a decision tree, a circular node indicates a point where a random event occurs. True False 3) The optimistic and conservative approaches to decision making will always give the same result. True False
3. Using the following table, perform ALL FIVE of the techniques for Decision Making under Uncertainty: Maximax, Maximin, Hurwicz Realism (α = 0.4), LaPlace and Minimax Regret. Show the work on excel file. SIZE OF FIRST STATION GOOD MARKET FAIR MARKET POOR MARKET ($) ($) ($) Small 50,000 20,000 -10,000 Medium 80,000 30,000 -20,000 Large 100,000 30,000 -40,000 Very large 300,000 25,000 -160,000
9- Majid is framing the decisions that will contribute significantly to the achievement of company objectives.The above statement refers to which of the following? a. Majid is framing strategic decisions b. Majid is framing simple decisions c. Majid is framing minor decision d. Majid is framing operational decisions
Which of the following statements is true concerning decision tree conventions? a.Time proceeds from right to left. b.The trees are composed of circles, triangles and ovals. c.The nodes represent points in time. d.Probabilities of outcomes are shown to the right of the end nodes.
You often hear about the trade-off between risk and reward. Is this trade-off part of decision making under uncertainty when the decision maker uses theEMV criterion? For example, how does this work in investment decisions?
1. Suppose you are going on a weekend trip to a city that is d miles away. Develop a model that determines your round-trip gasoline costs. What assumptions or approximations are necessary to treat this model as a deterministic model? Are these assumptions or approximations acceptable to you? 2. Suppose that a manager has a choice between the following two mathematical models of a given situation: (a)a relatively simple model that is a reasonable approximation of the real situation, and (b)a thorough and complex model that is the most accurate mathematical representation of the real situation possible. Why might the model described in part (a) be preferred by the manager?
Which of the following is true? a)The maximin criterion is an approach in Optimization under uncertainty which finds a solution that has the best possible payoff. b)The maximin criterion is an approach in Optimization under uncertainty which finds a solution with the best worst possible payoff. c)A risk profile represents the probability distribution of uncertain inputs. d)Decision tree is a method to solve any optimization problem when the outcomes are subject to uncertainty.
Which of the following does NOT apply to decision making under uncertainty? a. Minimax regret b. Maximin return c. Maximize expected return d. Maximax return
Do the following problems using either TreePlan A student is deciding which scholarships (out of two) to accept. The first scholarship is worth $10,000 but carries the condition that recipients cannot accept another other forms of income (such as other scholarships). The second scholarship is awarded in a competition, where this student has a 50% chance of earning $7,000, a 40% chance of earning $10,000, and a 10% chance of earning $15,000. The student must inform the administrator of the first scholarship whether she will be accepting their offer today. A. Develop a decision tree to determine which scholarship this student should accept (using our normal decision criteria). B. Under what circumstance might the student accept the other scholarship?
Which of the following statements is correct regarding the EMH form? Select one: None of the answers are correct If the market is weak-form efficient, then it is also semistrong and strong-form efficient. If the market is semistrong form efficient, then it is also strong form efficient If a market is strong-form efficient, it is also semistrong and weak form efficient If the market is strong-form efficient, it is also semistrong but not weak-form efficient