The project team has estimated probabilities for the occurrences of high and medium demand as 0.5 and
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Question:
The project team has estimated probabilities for the occurrences of high and medium demand as 0.5 and 0.3, respectively. The project team has also prepared the payoff table, expressed in revenue per 000' birr, as given below.
Alternative, Ai | States of nature, Sj | |||
High (S1) | Moderate (S2) | Low (S3) | ||
Large(A1) | 50 | 70 | 100 | |
Medium(A2) | 40 | 80 | 90 | |
Small(A3) | 90 | 70 | 60 |
What decision would you recommend using:
- EMV decision criterion
- EOL decision criterion
- Determine EVPI for the above exercise
- Suppose Scientific Marketing, Inc. would like to offer analysis that will provide certainty about demand conditions (favorable). Additional information will cost $15,000. Should the administration purchase the additional information?
- What is a decision tree? Depict decision tree analysis for the EMV decision criterion
Identify the optimal decision alternative together with the value of the decision
- Maximax (optimistic) decision criterion
- Maximin (pessimistic) ''
- Criterion of realism (Hurwicz) "
- Equally likely (Laplace) "
- Minimax regret "
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