Below you are given a profit payoff table involving two decision alternatives and three states of nature. The probability that s₁ will occur is .2; the probability that s₂ will occur is .6.
The recommended decision based on the expected value criterion is

Question

Below you are given a profit payoff table involving two decision alternatives and three states of nature.

The probability that s₁ will occur is .2; the probability that s₂ will occur is .6.
The recommended decision based on the expected value criterion is

Quizplus · Accepted Answer

The expected value of alternative A is (0.2)(20) + (0.6)(10) + (0.2)(0) = 8, while the expected value of alternative B is (0.2)(0) + (0.6)(15) + (0.2)(10) = 12. Therefore, alternative B has a higher expected value and is the recommended decision based on the expected value criterion. Alternative A is not optimal.

Below You Are Given a Profit Payoff Table Involving Two