The following payoff table shows the profit for a decision problem with two states of nature...
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The following payoff table shows the profit for a decision problem with two states of nature and two decision alternatives. State of Nature Decision Alternative $1 52 d dz 11 2 5 4 (a) Suppose P(s) = 0.2 and P(s2) = 0.8. What is the best decision using the expected value approach? The best decision is --?-- with an expected value of (b) Perform sensitivity analysis on the payoffs for decision alternative d. Assume the probabilities are as given in part (a), and find the range of payoffs under states of nature s and s that will keep the solution found in part (a) optimal. As long as the payoff for s under d is --?-- As long as the payoff for s under d is --?-- v , then the solution found in part (a) will be optimal. , then the solution found in part (a) will be optimal. Is the solution more sensitive to the payoff under state of nature s or s? $1 52 The following payoff table shows the profit for a decision problem with two states of nature and two decision alternatives. State of Nature Decision Alternative $1 52 d dz 11 2 5 4 (a) Suppose P(s) = 0.2 and P(s2) = 0.8. What is the best decision using the expected value approach? The best decision is --?-- with an expected value of (b) Perform sensitivity analysis on the payoffs for decision alternative d. Assume the probabilities are as given in part (a), and find the range of payoffs under states of nature s and s that will keep the solution found in part (a) optimal. As long as the payoff for s under d is --?-- As long as the payoff for s under d is --?-- v , then the solution found in part (a) will be optimal. , then the solution found in part (a) will be optimal. Is the solution more sensitive to the payoff under state of nature s or s? $1 52
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