Exam 19: Decision Analysis

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.

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

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

Consider the following decision table with rewards in $ millions. Using the maximax criterion,the appropriate choice would be __________.

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 revised probability of a Bull market,P (S₁|F₁),is ________.

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 "net loss of $50,000" is one of the ___________.

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

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

In decision-making under risk,the expected monetary value without information 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 "Low" is ____.

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).