Exam 6: Decision Making Under Uncertainty

The preferred criterion in decision making is

The network can conduct market research to determine whether a program will be a hit or a flop.If the market research report is perfectly reliable,what is the most the network should be willing to pay for it?

Rational decision makers are never willing to violate the expected monetary value (EMV)maximization criterion when large amounts of money are at stake.

For a risk averse decision maker,the certainty equivalent is less than the expected monetary value (EMV).

When the lines for two alternatives cross on a strategy region chart,this shows

The mean of a probability distribution is also called the

In a single-stage decision tree problem,you make _____ first and then all you wait to see a(n)_____.

The expected value of perfect information (EVPI)is equal to

Which sensitivity analysis chart is most useful for seeing how the optimal decision changes as selected inputs vary?

In decision trees,an end node (a triangle)indicates that the problem is completed; that is,all decisions have been made,all uncertainty has been resolved,and all payoffs/costs have been incurred.

The expected monetary value represents a long-run average.

The station is most uncertain about the average monthly revenue associated with the rock format and an A1 audience.Construct a strategy region chart for this input variable with a possible range from $85,000 to $200,000.Does the optimal decision to select the country format change at any point in this range?

Construct a decision tree to help the television network identify the strategy that maximizes its expected profit in responding to a newly proposed television program.Make sure to label all decision and chance nodes and include appropriate costs,payoffs and probabilities.

Construct a decision tree to identify the course of action that maximizes WTC's expected profit.Make sure to label all decision and chance nodes and include appropriate costs,payoffs and probabilities.

If x is a monetary value (a payoff if positive,a cost if negative),U(x)the utility of this value,and R > 0 is the risk tolerance,then the function U(x)= 1 - is called a(n)_____ utility.

Generate a risk profile for each of WTC's possible decisions in this problem.Characterize the differences in risk for the different options.

There are three types of nodes that are used with the decision trees.They are the

Utility functions are mathematical functions that transform monetary values - payoffs and costs - into _____ values.

Construct a decision tree to help the credit union decide whether or not to make the loan.Make sure to label all decision and chance nodes and include appropriate costs,payoffs and probabilities.