Exam 19: Decision Theory

The maximax criterion finds the best possible payoff for each alternative,and then chooses the alternative that yields the maximum (best)possible payoff.

The _____________ criterion finds the best-possible payoff for each alternative and then chooses the alternative that yields the maximum best-possible payoff.

Alternatives 1 and 2 in the following payoff table represent the two possible manufacturing strategies that the EKA manufacturing company can adopt.The level of demand affects the success of both strategies.The states of nature (S_I)represent the levels of demand for the company products.S₁,S₂,and S₃ characterize high,medium,and low demand,respectively.The payoff values are in thousands of dollars.

When we assess the worth of sample information in a decision-making problem,we are performing a(n)_____________ analysis.

When making a decision in an environment of ________________,the decision maker knows which of the states of nature will actually occur.

Maximin is a criterion used when making decisions under _____________.

In a decision-making situation,the maximum amount of money that should be spent to obtain perfect information is called the ______________________________.

A decision maker's expected _____________ is based upon his/her attitude toward risk.

A corn farmer has categorized the weather into three possible levels.The weather conditions will affect the timing of the harvest and the associated payoff.In this situation,the weather conditions are called the ____________________________.

In utility analysis,a utility curve that shows a rapid increase in utility for initial amounts of money followed by a gradual leveling off for larger amounts of money is appropriate for a risk-seeking decision maker.