Elizabeth, a Decision Maker Has Decided to Expand Her Operations

Short Answer

Elizabeth, a decision maker has decided to expand her operations and become more efficient. She uses 3 decision variables-d₁ is to do nothing; d₂ is a moderate expansion; and d₃ is a major expansion.

a. Determine the expected value of d₂ if the states of nature are S₁ = 0.25; S₂ = 0.60; and S₃ = 0.15.
b. Determine the expected value for d₃ if the states of nature are S₁ = 0.25; S₂ = 0.60; and S₃ = 0.15.