Question: Question 1 (Decision Making: Risk Uncertainty) The following table is a payoff matrix associated with a farmer's decision to purchase a pump for irrigation or

Question 1 (Decision Making: Risk Uncertainty)

Question 1 (Decision Making: Risk Uncertainty) The following table is a payoff matrix associated with a farmer's decision to purchase a pump for irrigation or to depend on the rains. Future Crop Demand State of Nature High Medium Low Decision 0.30 0.45 0.25 Alternative/Prob. Do not Irrigate 9m 5m 3m 1.5hp Pump 11m com -4m 3.0hp Pump 16m &m -6m 5.0hp Pump 18m 12m -7m Determine which alternative will be chosen under (a) expected value (EV) criterion? (b) Maximin? (c) Maximax? (d) Draw up a regrets table and use it to determine which alternative will be chosen under the minimax regret decision criterion. (e) Estimate the expected value of perfect information (EVPI)

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