Statistics for Business & Economics, Revised (MindTap Course List)
12th Edition
ISBN: 9781285846323
Author: David R. Anderson, Dennis J. Sweeney, Thomas A. Williams, Jeffrey D. Camm, James J. Cochran
Publisher: South-Western College Pub
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Textbook Question
Chapter 21.3, Problem 8E
Consider a variation of the PDC decision tree shown in Figure 21.5. The company must first decide whether to undertake the market research study. If the market research study is conducted, the outcome will either be favorable (F) or unfavorable (U). Assume there are only two decision alternatives d1 and d2 and two states of nature s1 and s2. The payoff table showing profit is as follows:
State of Nature | ||
Decision Alternative | s1 | s2 |
d1 | 100 | 300 |
d2 | 400 | 200 |
- a. Show the decision tree.
- b. Use the following probabilities. What is the optimal decision strategy?
P(F) = .56 | P(s1 | F) = .57 | P(s1 | U) = .18 | P(s1) = .40 |
P(U) = .44 | P(s2 | F) = .43 | P(s2 | U) = .82 | P(s2) = .60 |
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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?
The following payoff table shows profit for a decision analysis problem with two decision alternatives and three states of nature.
The National Highway Association is studying the relationship between the number of bidders on a highway project and the winning (lowest) bid for the project. Of particular interest is whether the number of bidders increases or decreases the amount of the winning bid.
Bidders
Price
9.0
5.1
9.0
8.0
3.0
9.7
10.0
7.8
5.0
7.7
10.0
5.5
7.0
8.3
11.0
5.5
6.0
10.3
6.0
8.0
4.0
8.8
7.0
9.4
7.0
8.6
7.0
8.1
6.0
7.8
Given:
Correlation of Coefficient: 0.7064 (This is correct)
Coefficient of determination: 49.90% (This is correct)
ŷ = 11.2360 + (-0.4667)x (This is correct)
Create a scatter plot of the data
Complete a regression analysis of the relationship. Slope = ______
Estimate the winning bid if there were seven bidders. Winning bid cost ______ millions.
Compute the 95% prediction interval for a winning bid if there are seven bidders. [ _____________, ______________]
Chapter 21 Solutions
Statistics for Business & Economics, Revised (MindTap Course List)
Ch. 21.2 - Prob. 1ECh. 21.2 - A decision maker faced with four decision...Ch. 21.2 - Hudson Corporation is considering three options...Ch. 21.2 - Myrtle Air Express decided to offer direct service...Ch. 21.2 - The distance from Potsdam to larger markets and...Ch. 21.2 - Seneca Hill Winery recently purchased land for the...Ch. 21.2 - The Lake Placid Town Council has decided to build...Ch. 21.3 - Consider a variation of the PDC decision tree...Ch. 21.3 - A real estate investor has the opportunity to...Ch. 21.3 - Dante Development Corporation is considering...
Ch. 21.3 - Hales TV Productions is considering producing a...Ch. 21.3 - Martins Service Station is considering entering...Ch. 21.3 - Lawsons Department Store faces a buying decision...Ch. 21.4 - Suppose that you are given a decision situation...Ch. 21.4 - In the following profit payoff table for a...Ch. 21.4 - To save on expenses, Rona and Jerry agreed to form...Ch. 21.4 - The Gorman Manufacturing Company must decide...Ch. 21 - An investor wants to select one of seven mutual...Ch. 21 - Warren Lloyd is interested in leasing a new car...Ch. 21 - Hemmingway, Inc. is considering a 50 million...Ch. 21 - Embassy Publishing Company received a six-chapter...Ch. 21 - Lawsuit Defense Strategy John Campbell, an...
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