Consider the following problem with three decision alternatives and three states of nature with the following payoff
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Consider the following problem with three decision alternatives and three states of nature with the following payoff table representing profits:
States of Nature | ||||
S1 | S2 | S3 | ||
Decisions | d1 | 4 | 4 | -2 |
d2 | 0 | 3 | -1 | |
d3 | 1 | 5 | -3 |
a. What is the optimal decision if the decision maker is optimistic?
b. What is the optimal decision if the decision maker is pessimistic?
c. What is the optimal decision using the minimax regret approach?
d. If the probabilities that S1, S2, and S3 will occur are 0.2, 0.5, and 0.3, respectively, what is the optimal decision?
e. Given the information in (d), what is EVPI?
Related Book For
Operations Management Processes and Supply Chains
ISBN: 978-0133872132
11th edition
Authors: Lee J. Krajewski, Manoj K. Malhotra, Larry P. Ritzman
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