Below you are given a profit payoff table involving three decision alternatives and three states of nature. The probability of occurrence of s₁ is .1 and the probability of occurrence of s₂ is .3.
The expected value of the best alternative is

Question

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

The probability of occurrence of s₁ is .1 and the probability of occurrence of s₂ is .3.
The expected value of the best alternative is

Quizplus · Accepted Answer

The expected values for each alternative are:
Alternative 1: (0.2)(9) + (0.3)(15) + (0.5)(-5) = 5.6
Alternative 2: (0.2)(4) + (0.3)(10) + (0.5)(15) = 9.2
Alternative 3: (0.2)(6) + (0.3)(6) + (0.5)(6) = 5.4

Therefore, the best choice is Alternative 2 with an expected value of 9.2.

Below You Are Given a Profit Payoff Table Involving Three