Exam 19: Decision Analysis

The expected monetary payoff of perfect information is the value of perfect information.

Trey Leeman,Operations Manager at National Consumers,Inc.(NCI),is evaluating alternatives for increasing capacity at NCI's Fountain Hill plant.He has identified four alternatives,and has constructed the following payoff table which shows payoffs (in $1,000,000's)for the three possible levels of market demand: The opportunity loss for the combination "Purchase New Equipment" and "Low" is ___.

The value of sample information is the ratio of the expected monetary value with information to the expected monetary value without information.

Ray Crofford is evaluating investment alternative s to invest $100,000 which he inherited from his grandfather.His investment advisor has identified four alternatives and constructed the following payoff table which shows expected profits (in $10,000's)for various market conditions: For the combination of 'Bear' and 'Mixture',the opportunity loss is ___.

Frank Forgione has the right to enter a contest where he has a 50% chance of winning $50,000 and a 50% chance of losing $0.It costs Frank nothing to enter the contest.If he is willing to give up his right to enter the contest for a sure payment of $10,000,he is ___.

In a decision-making scenario,if it is not known which of the states of nature will occur but the probabilities of occurrence of the states are known.the scenario is called decision-making under risk.

In a decision-making under uncertainty scenario using the strategy of minmax regret,all the entries in the opportunity loss table must be zero or positive.

Ray Crofford is evaluating investment alternatives for the $100,000 which he inherited from his grandfather.His investment advisor has identified four alternatives and constructed the following table which shows expected profits (in $10,000's)for various market conditions and their probabilities: If Ray uses the EMV criterion,the appropriate choice is ___.

Trey Leeman,Operations Manager at National Consumers,Inc.(NCI),is evaluating alternatives for increasing capacity at NCI's Fountain Hill plant.He has identified four alternatives,and has constructed the following payoff table which shows payoffs (in $1,000,000's)for the three possible levels of market demand: If Trey uses the Hurwicz criterion with alpha = 0.4,the appropriate alternative would be: ___.

Frank Forgione has the right to enter a contest where he has a 50% chance of winning $50,000 and a 50% chance of losing $0.It costs Frank nothing to enter the contest.If he is willing to give up his right to enter the contest for a sure payment of $25,000,he is ___.

Trey Leeman,Operations Manager at National Consumers,Inc.(NCI),is evaluating alternatives for increasing capacity at NCI's Fountain Hill plant.He has identified four alternatives,and has constructed the following payoff table which shows payoffs (in $1,000,000's)for the three possible levels of market demand: If Trey uses the Hurwicz criterion with alpha = 0.1,the appropriate alternative would be: ___.

In a decision-making under uncertainty scenario,the decision maker attempts to develop a strategy based on payoffs since virtually no information is available about which state of nature will occur.

In a decision-making under uncertainty scenario,the decision maker chooses the decision alternative that has the minimum expected (i.e. ,probability-weighted)payoff among all the available alternatives.

In decision-making under uncertainty,the approach that considers only the best and the worst payoffs for each decision alternative is the ___.

Consider the following decision table with rewards in $ millions. Using the Hurwicz criterion with alpha = 0.1,the appropriate choice would be ___.

In decision-making under risk,the expected monetary payoff of perfect information is the weighted average of the best payoff for each state of nature (using the probability of the state of nature as the weight).

Ray Crofford is evaluating investment alternatives for the $100,000 which he inherited from his grandfather.His investment advisor has identified two alternatives And constructed the following tables which show (1)expected profits (in $10,000's)for Various market conditions and their probabilities,and (2)the advisor's track record on Predicting Bull and Bear markets: If the advisor predicts a Bull market the EMV of the Bonds alternative,using revised probabilities,is ___.

Ray Crofford is evaluating investment alternatives to invest $100,000 which he inherited from his grandfather.His investment advisor has identified four alternatives and constructed the following payoff table which shows expected profits (in $10,000's)for various market conditions: If Ray uses the Hurwicz criterion with alpha = 0.1,the appropriate choice is ___.

In decision-making under risk,the expected monetary value without information is the largest of the expected monetary values for the various decision alternatives.

Melissa Rossi,Product Manager at National Consumers,Inc.(NCI),is evaluating alternatives for introducing a new package for toothpaste.She has identified four alternative markets,and has constructed the following table which shows NCI's rewards (in $1,000,000's)for various levels of acceptance by the markets and their probabilities: The EMV of introducing the new package in the "Northeast only" market is ___.