Exam 17: An Introduction to Decision Theory

You are trying to decide in which of the three companies you should invest. Refer to the following Payoff Table. If the market declines in the next year, which of the following statements are correct? i. The Opportunity Loss for Company A is $250. ii. The Opportunity Loss for Company B is $30. iii. The Opportunity Loss for Company C is $500.

Given the payoff table below, determine the expected value and size of warehouse that would be built, given a probability of 0.7 and 0.3 to the high and low demands, respectively.

Below is the payoff table for two stocks based on whether the market rises or declines. Which of the following represents the opportunity loss table?

You have a decision to invest $10,000 in any of four different companies. You estimate the probabilities that the economy will be favourable or unfavourable and you estimate the percent returns over the next year. Based on expected opportunity loss, which company do you choose?

Given the payoff table below, determine the profit and size of warehouse that would be built, using the maximin criterion.

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

You are trying to decide in which of the three companies you should invest. Refer to the following Payoff Table. If the probability of the Market rising in the next year is 0.60, which of the following statements are correct? i. The Expected Monetary Value for Company A is $1,860. ii. The Expected Monetary Value for Company B is $1,860. iii. The Expected Monetary Value for Company C is $1,540.

Consider the following decision table in which w, x, y, and z are decision alternatives and A and B are the two possible states of nature, with probabilities 0.40 and 0.60. The expected value for decision Y is ___________.

The maximin strategy:

The states of nature are:

You have a decision to invest $10,000 in any of four different companies. You estimate the probabilities that the economy will be favourable or unfavourable and you estimate the percent returns over the next year. Based on expected value, what company do you choose?

You are trying to decide in which of the three companies you should invest. Refer to the following Payoff Table. If the probability of the Market rising in the next year is 0.60, which of the following statements are correct? i. The Expected Monetary Value for Company A is $1,860. ii. The Expected Monetary Value for Company B is $1,860. iii. The Expected Monetary Value for Company C is $1,860.

Determine the expected opportunity loss for the following payoff table.

You are trying to decide in which of the three companies you should invest. Refer to the following Payoff Table. If the probability of the market declining in the next year is 0.4, which of the following statements are correct? i. The Expected Opportunity Loss for Company A is $120. ii. The Expected Opportunity Loss for Company B is $120. iii. The Expected Opportunity Loss for Company C is $440.

You are trying to decide in which of the three companies you should invest. Refer to the following Payoff Table. If the market rises in the next year, which of the following statements are correct? i. The Opportunity Loss for Company A is $200. ii. The Opportunity Loss for Company B is $200. iii. The Opportunity Loss for Company C is $700.

I You are trying to decide in which of the three companies you should invest. Refer to the following Payoff Table. If the market rises in the next year, which of the following statements are correct? i. The Opportunity Loss for Company A is $200. ii. The Opportunity Loss for Company B is $200. ii. The Opportunity Loss for Company C is $700.

You are trying to decide in which of the three companies you should invest. Refer to the following Payoff Table. If the probability of the market declining in the next year is 0.4, which of the following statements are correct? i. The Expected value of stock purchased under conditions of certainty is $1,980. ii. The Expected value of perfect information is $120. iii. The Expected value of perfect information is $180.

You have a decision to invest $10,000 in any of four different companies. You estimate the probabilities that the economy will be favourable or unfavourable and you estimate the percent returns over the next year. Which company is chosen using the maximax criterion?

You are trying to decide in which of the three companies you should invest. Refer to the following Payoff Table. If the probability of the Market rising in the next year is 0.60, which of the following statements are correct? i. The Opportunity Loss for Company A is $1,860. ii. The Opportunity Loss for Company B is $1,860. iii. The Opportunity Loss for Company C is $1,540.

You have a decision to invest $10,000 in any of four different companies. You estimate the probabilities that the economy will be favourable or unfavourable and you estimate the percent returns over the next year. What is the expected value for Company 2?