Question: The following profit payoff table was presented in Problems 1 and 4. State of Nature Decision Alternative s1 s2 s3 d1 250 100 25 d2

The following profit payoff table was presented in Problems 1 and 4.

State of Nature Decision Alternative s1 s2 s3 d1 250 100 25 d2 100 100 75 The probabilities for the states of nature are P(s1) ¼ 0.65, P(s2) ¼ 0.15, and P(s3) ¼ 0.20.

a. What is the optimal decision strategy if perfect information is 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?

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