A manager has developed a payoff table that indicates the profits associated with a set of alternatives under two possible states of nature. (20 points)

a. If the manager uses maximin as the decision criterion, which of the alternatives should she choose?

b. If the manager uses minimax regret as the decision criterion, which of the alternatives would she choose?

c. Use the expected value criterion to select the best alternative. Assume that the probability of S2 is equal to 0.4.

d. Compute the expected value of perfect information assuming that the probability of S2 is equal to 0.4.

Transcribed Image Text:

Alt 1 2 3 S1 10 S2 2 -28 85 Alt 1 2 3 S1 10 S2 2 -28 85

Answer rating: 100% (QA)

a Alternative 3 The maximax rule involves selecting the alternative that maximises the ma... View the full answer