Exam 19: Decision Analysis

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 a decision analysis problem,variables (such as general macroeconomic conditions)which are not under the decision maker's control are called prior probabilities.

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. For the combination of 'T-Bills' and 'Neutral',the opportunity loss is _________.

In decision-making under uncertainty,a pessimistic approach is the __________.

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 maximin criterion,the appropriate alternative would be: _____________.

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: _____________.

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 = 0.9,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. The opportunity loss for the combination "Purchase New Equipment" and "High" is ___.

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.

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 Bear market the EMV of the Stocks alternative,using revised probabilities,is ________.

A particular electronic component is produced at two plants for an electronics manufacturer.Plant A produces 70% of the components used and the remainder are produced by plant B.The probability that a component is defective is 0.02 if it is produced at plant A and 0.01 if it is produced at plant B. The probability that the component is defective is ______

A risk-taker decision maker will bail out of risky scenario only if the compensation to bail out is more than the expected monetary payoff from the risky scenario.

Consider the following decision table with rewards in $ millions. If you are using the maximin criterion and decide d₄,then x is ______.

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

Consider the following decision table with rewards in $ millions. If you are using the maximax criterion and decide d₁,then x is ______.

The value of perfect information is the difference between the monetary payoff with perfect information and the expected monetary payoff with no information.

Dan Hein owns the mineral and drilling rights to a 1,000 acre tract of land. If he drills a well and does not strike oil his net loss will be $50,000,but if he drills a well and strikes oil his net gain will be $100,000.If he does not drill,his loss is the cost of the mineral and drilling rights,which amount to $1000.For Dan's decision problem,the variable "oil in the tract" is one of the ___________.

Dan Hein owns the mineral and drilling rights to a 1,000 acre tract of land. If he drills a well and does not strike oil his net loss will be $50,000,but if he drills a well and strikes oil his net gain will be $100,000.If he does not drill,his loss is the cost of the mineral and drilling rights,which amount to $1000.The probability of the state of nature "oil in the tract" is unknown.If Dan is a pessimist,he would choose the ____________.

In a decision-making scenario,if the decision maker knows which state of nature will occur,the scenario is called decision-making under certainty.

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.