Question: A decision maker is looking to minimising costs through three alternative decisions a 1 , b 2 and c 3 under two states of nature/events

  1. A decision maker is looking to minimising costs through three alternative decisions a1 , b2 and c3 under two states of nature/events S1 and S2 with S1 having a probability of 30% .

For a1 payoffs for s1 K100 million and s2 K540 million

For a2 payoff for s1 K150 million and s2 K50 million

For a3 payoff for s1 K350 million and s2 K320 million

  1. Find EMV and recommend the course of action
  2. Find the EMV under certainty
  3. Use the EVC to find the EVPI
  4. Determine the opportunity loss table
  5. Find the course of action that minimises EOL
  6. Compare the minimum EOL with the EVPI.

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