Exam 20: An Introduction to Decision Theory

A student is planning a trip home for the holidays.The student has three options, car, train, or jet.The decision depends on the weather is either good or bad.In addition, the student estimated the costs for each option.The payoff table follows. What is the expected value of taking a jet?

You have a decision to invest $10,000 in any of four different companies.You estimate that the probabilities that the economy will be favorable or unfavorable, and you estimate the percent returns over the next year. What is the maximin choice?

A student is planning a trip home for the holidays.The student has three options, car, train, or jet.The decision depends on the weather is either good or bad.In addition, the student estimated the costs for each option.The payoff table follows. What is the expected value of taking the train?

The manager of Paul's fruit and vegetable store is considering the purchase of a new seedless watermelon from a wholesale distributor. Since this seedless watermelon costs $4, will sell for $7, and is highly perishable, he only expects to sell between 6 and 9 of them. What is the payoff value for the purchase of 6 watermelons when the demand is for 7 or more watermelons?

The national sales manager for "I colored this" (ICT) T-shirts, provides all salespersons with the payoff table shown below, giving the estimated profit when a retailer purchases from 1 to 4 dozen T-shirts. The probability of demand for each state of nature is also shown. What is the value of perfect information if the expected payoff is $180?

The national sales manager for "I colored this" (ICT) T-shirts, provides all salespersons with the payoff table shown below, giving the estimated profit when a retailer purchases from 1 to 4 dozen T-shirts. The probability of demand for each state of nature is also shown. What is the maximum payoff under conditions of certainty?

A minimax regret strategy will always choose the act or alternative that

When the payoffs are profits, the maximin strategy selects the alternative or act with the maximum gain.

A person is trying to decide if they should buy a lottery ticket.The ticket costs $1.00.If the ticket is a winner, the prize would be $10,000.Knowing that winning $10,000 is not a certain outcome (state of nature), the person finds that the probability of winning is 0.0009.Based on this information, the following payoff table can be constructed: What is the decision using a maximax or optimistic approach?

You have four different strategic business plans you can select to implement against your competitors.You estimate that the probability that the competitors are aware of your strategies is 0.3 and 0.7 that they are unaware.The payoffs are estimated for each scenario. What strategy should you choose if the competitor is aware?

The manager of Paul's fruit and vegetable store is considering the purchase of a new seedless watermelon from a wholesale distributor. Since this seedless watermelon costs $4, will sell for $7, and is highly perishable, he only expects to sell between 6 and 9 of them. Based on a maximin decision strategy, what alternative is selected?

A person is trying to decide if they should buy a lottery ticket. The ticket costs $2.00. If the ticket is a winner, the prize would be $1,000. Knowing that winning $1,000 is not a certain outcome (state of nature), the person finds that the probability of winning is 0.001. Based on this information, the following payoff table can be constructed: What is the decision using a maximax or optimistic approach?

You have four different strategic business plans you can select to implement against your competitors.You estimate that the probability that the competitors are aware of your strategies is 0.3 and 0.7 that they are unaware.The payoffs are estimated for each scenario. What is the minimax choice?

The manager of Paul's fruit and vegetable store is considering the purchase of a new seedless watermelon from a wholesale distributor. Since this seedless watermelon costs $4, will sell for $7, and is highly perishable, he only expects to sell between 6 and 9 of them. What is the payoff value for the purchase of 8 watermelons when the demand is for 6 watermelons?

By definition, the decision maker has no control over the states of nature.

An expected opportunity loss can only be greater than or equal to zero.

The national sales manager for "I colored this" (ICT) T-shirts, provides all salespersons with the payoff table shown below, giving the estimated profit when a retailer purchases from 1 to 4 dozen T-shirts. The probability of demand for each state of nature is also shown. What is the expected payoff for purchasing 1 dozen T-shirts?

In decision theory, _______ create uncertainty in selecting an alternative.

How can the probabilities assigned to states of nature be determined?

The manager of Paul's fruit and vegetable store is considering the purchase of a new seedless watermelon from a wholesale distributor. Since this seedless watermelon costs $4, will sell for $7, and is highly perishable, he only expects to sell between 6 and 9 of them. What is the opportunity loss for purchasing 9 watermelons when the demand is for 7 watermelons?