Question: (a) The maximin payoff criterion involves choosing the alternative with the highest minimum payoff. For A1, the minimum payoff is 14000, for A2 it's 19000.

(a) The maximin payoff criterion involves choosing the alternative with the highest minimum payoff. For A1, the minimum payoff is 14000, for A2 it's 19000. So, under the maximin criterion, we should choose A2. (b) The maximum likelihood criterion involves choosing the alternative with the highest payoff for the most likely state of nature. The most likely state of nature is S1 (with a probability of 0.6). The payoffs for S1 are 25000 for A1 and 23000 for A2. So, under the maximum likelihood criterion, we should choose A1. (c) The Bayes decision rule involves calculating the expected payoff for each alternative and choosing the one with the highest expected payoff. The expected payoff for A1 is (0.625000) (0.320000) (0.114000) = 22500. The expected payoff for A2 is (0.623000) (0.321000) (0.119000) = 22100. So, under the Bayes decision rule, we should choose A1

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Mathematics Questions!

QUESTION 1 PRDEAPS/2024 You are given the following payoff table (in units of thousands of Rands) for a decision Analysis Problem. Show all formulas and calculations. Alternatives State of Nature S1...

You are given the following payoff table (in units of thousands of Rands) for a decision Analysis Problem. Show all formulas and calculations. Alternatives State of Nature S1 S2 S3 A1 25000 20000...

QUESTION 1 You are given the following payoff table (in units of thousands of Rands) for a decision Analysis Problem. Show all formulas and calculations. Alternatives State of Nature S1 S2 S3 A1...

You are given the following payoff table (in units of thousands of Rands) for a decision Analysis Problem. Show all formulas and calculations. Alternatives State of Nature S1 S2 S3 A1 25000 20000...

Use the Powerpoint picture File below to complete the exercise. All business decision problems have certain common characteristics. These four items below constitute a formal description of the...

Laplace . Assume the probability of each state of nature (market condition) is equally likely. EV(A1) = (.3333 x FP1) + (.3333 x FP2) + (.3333 x FP3) EV(A2) = (.3333 x FP1) + (.3333 x FP2) + (.3333 x...

A heat pump with a COP of 3.2 is used to heat a perfectly sealed house (no air leaks). The entire mass within the house (air, furniture, etc.) is equivalent to 1200 kg of air. When running, the heat...

Define a. Normally distributed variable b. Normally distributed population c. Parameters for a normal curve

Which of the following is NOT one of the views or approaches identified for understanding the Digital Domain in relation to an individual's personality? Sepyrator Beflector Enhuncer Moditer:

There are 2 Pictures. They are the same problem but it continued on the second page. Thanks! piciciung Cash flows fr PR 13-2A Statement of cash flows-indirect method Obj. 2, 3,4,5 The comparative...