The following profit payoff table was presented in problems 1 and 4
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The following profit payoff table was presented in problems 1 and 4:
State of Nature
Decision Alternatives s1 s2 s3
d1 250 100 25
d2 100 100 75
The probabilities for the states of nature are P(s1) = .65, P(s2) = .15, and P(s3) = .20
a) What is the optimal decision strategy if perfect information were available?
b) What is the expected value for the decision strategy developed in part (a)?
c) Using the expected value approach what is the recommended decision without perfect information? What is its expected value?
d) What is the expected value of perfect information?
12 years ago
The probabilities for the states of nature Solution
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