8. A decision maker is faced with three decision alternatives and four states of nature shown in the following profit (pay- off) table in terms of Millions.

Payoff table for three Decision alternatives and four states of nature

Decision Alternatives	S1	S2	S3	S4
A	$ 12	$ 7	$ 8	$ 3
B	$ 9	$ 8	$ 13	$ 5
C	$ 7	$ 6	S 9	S 11

If the decision maker knows nothing about the probabilities of the four states of nature (s1, s2, s3, and s4) then what would be your decision; (2+ 2+4 + 4+3=15)

1. Using pessimistic or Conservative approach (2)

Ans.

What decision?

Value of decision?

2. Using Optimistic Approach (2)

Ans.

What decision?

Value of decision?

3. Minimizing the maximum regret approach (4)

Ans.

What decision?

Value of decision?

4. If, for s1, s2, s3, and s4 probability is given as 0.3, 0.1, 0.4, and 0.2 respectively then what would be the best expected pay off under risk? (4)

Ans.

What decision?

Value of decision?

5. What would be the expected value of perfect information? (3)

Ans.