Exam 22: Decision Modeling

A poker player is considering three different options after his opponent bet 200 before him.If the player folds,he will lose instantly.If the player calls,he figures he will win half the time.If he raises,he figures that the opposing player will not re-raise him,but rather will either call or fold.He figures the opposing player will call only ¼ of the time,folding the other ¾ of the time.If the opposing player calls his raise,he figures he will never win.The pot size is 1,000 (including the opposing player's bet). a.Draw a decision tree for this scenario including the information provided in part b. b.Suppose that the player is thinking of raising to $400 (he will put in 200 to match the opponent's bet and another 200 as a raise,his opponent would then have to put in 200 more to call the raise).Is this the best option or should he instead call or fold? c.At what raise size is the player's EMV of a raise equivalent to simply calling?

What is the EMV for Option 1 in the following decision table?

What limitation(s)do decision trees overcome compared to decision tables?

________ is the difference between the payoff under perfect information and the payoff under risk.

Describe the meaning of EVPI.

A plant manager wants to know how much he should be willing to pay for perfect market research.Currently there are two states of nature facing his decision to expand or do nothing.Under favorable market conditions the manager would make $100,000 for the large plant and $5,000 for the small plant.Under unfavorable market conditions the large plant would lose $50,000 and the small plant would make $0.If the two states of nature are equally likely,how much should he pay for perfect information?

________ is the expected payout or value of a variable that has different possible states of nature,each with an associated probability.

The campus bookstore sells highlighters that it purchases by the case.Cost per case,including shipping and handling,is $200.Revenue per case is $350.Any cases unsold will be discounted and sold at $175.The bookstore has estimated that demand will follow the pattern below a.Construct the bookstore's payoff table. b.How many cases should the bookstore stock in order to maximize expected profit? c.How would your answer differ if the clearance price were not $175 per case but $225 per case? (It is not necessary to re-solve the problem to answer this. )

When solving decision trees,what phrase represents the act of dropping an alternative from consideration because it is less favorable than another available option?

Which decision rule under uncertainty results in an optimistic decision? Why?

The maximin criterion is pessimistic,while the maximax criterion is optimistic.

The last step in the analytic decision process is to clearly define the problem and the factors that influence it.

Decision trees and decision tables can both solve problems requiring a single decision,but decision tables are the preferred method when a sequence of decisions is involved.

A decision maker who uses the maximin criterion when solving a problem under conditions of uncertainty is:

A(n)________ is a graphical means of analyzing decision alternatives and states of nature.

In a decision tree,the expected monetary values are computed by working from right to left.

What is the EMV for Option 1 in the following decision table?