Question 3 (25 marks)

Name the next Excel tab Question 3. For this question, you will choose a decision-making situation from your personal life. The situation will have at least five decision optionsnote that status quo can always be an optionand at least three states-of-nature scenarios that are beyond your control. The pay-off numbers in the table are costs, loss, or other minimization-type numbers that you can assume. You can assume any probability informationremember that probabilities add up to 1 when states-of-nature are collectively exhaustive. All the following steps need to be completed in the same tab (i.e., Question 3 tab):

Prepare a pay-off table in Excel for your situation.

Prepare a decision tree in Excel for this situation. You can use arrowheads and shapes in Excel.

Develop a regret table in Excel for this situation.

Using the decision making under uncertainty approach, what is your decision and optimal pay-off using:

Optimistic approach

Pessimistic approach

Minimax regret approach

Using the decision making under risk approach, what is your decision and optimal pay-off using:

Expected monetary value approach

If you wish to improve your expected monetary value decision, you need the services of a consultant who will provide you correct information about the occurrence of your states-of-nature. This service will cost you money. What is the value that this service brings to you, and how much should you be willing to pay for it?

Grading Criteria

Pay-off table in Excel (4 marks)

Drawing a decision tree in Excel (4 marks)

Develop a regret table in Excel (4 marks)

Decision and optimal pay-off (6 marks in total, see below for allocation)

Optimistic approach (2 marks)

Pessimistic approach (2 marks)

Minimax regret approach (2 marks)

Decision making under risk expected monetary value (3 marks)

Value of perfect information (4 marks)