A Payoff Table Is Shown Below The Following Prior Probabilities Are Assigned to the States of }
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Essay

A payoff table is shown below: $\begin{array} { ccc }&\text { Alternative }\\\text { State of Nature }& a_{1} & a_{2} & a_{3}& a_{4}\\s_{1} & 7 & 0 & 4 & 6 \\s_{2} & 2 & 4 & 3 & 5\end{array}$
The following prior probabilities are assigned to the states of nature:
P( $S _ { 1 }$ ) = 0.3, P( $S _ { 2 }$ ) = 0.7.
a. Calculate the expected monetary value for each act with present information. What decision should be made using the EMV criterion?
b. Convert the payoff table to an opportunity loss table.
c. Calculate the expected opportunity loss for each act with present information. What decision should be made using the EOL criterion?
d. What is the expected payoff with perfect information?
e. What is the expected value of perfect information?