The Alternatives 1 and 2 in the Following Payoff Table

Essay

The alternatives 1 and 2 in the following payoff table represent the two possible manufacturing strategies that the EKA manufacturing company can adopt.The level of demand affects the success of both strategies.The states of nature (S_I)represent the levels of demand for the company products.s₁,s₂,and s₃ characterize high,medium,and low demand,respectively.The payoff values are in thousands of dollars.Prior probabilities are .3 for s₁;.6 for s₂,and .1 for s₃. Find the expected monetary value for each of the alternatives and determine the best alternative (course of action)for the EKA manufacturing company using the expected monetary value criterion.